FEDERAL COURT OF AUSTRALIA

Murphy v Overton Investments Pty Ltd [2002] FCA 921

JOHN JAMES MURPHY v OVERTON INVESTMENTS PTY LTD

N 159 OF 1999

EMMETT J

26 JULY 2002

SYDNEY

N 159 OF 1999

THE COURT NOTES THAT:

1.                  Orders were made on 14 December 2001 dismissing the application with costs.

2.                  The applicant commenced proceedings N1664/2001 by way of appeal from the orders of 14 December 2001.

3.                  The Full Federal Court on 16 May 2002 ordered that the proceeding be remitted for determination in accordance with the Full Court’s reasons of 16 May 2002.

THE COURT ORDERS THAT:

1.                  The proceeding be determined in accordance with the reasons of 26 July 2002.

2.                  The applicant pay the respondent’s costs of the remitter.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

N 946 OF 1999

THE COURT NOTES THAT:

1. Orders were made on 14 December 2001 dismissing the application with costs.
2. The applicant commenced proceedings N1664/2001 by way of appeal from the orders of 14 December 2001.
3. The Full Federal Court on 16 May 2002 ordered that the proceeding be remitted for determination in accordance with the Full Court’s reasons of 16 May 2002.

THE COURT ORDERS THAT:

1. The proceeding be determined in accordance with the reasons of 26 July 2002.
2. The applicant pay the respondent’s costs of the remitter.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

N 159 OF 1999

N 946 OF 1999

REASONS FOR JUDGMENT

1                     This is the third occasion on which these two proceedings have been before me on a final basis.  On 16 June 2000, I ordered that both of the present proceedings be dismissed, for reasons that I delivered on 15 June 2000 (“my First Reasons” – see [2000] FCA 801).  Relevantly, I held that the Court did not have jurisdiction to grant relief under the Contracts Review Act 1980 (NSW) (“the Contracts Review Act”).  On 8 February 2001, a Full Court of the Federal Court (“the First Full Court”) upheld an appeal by Mr and Mrs Murphy against the orders that I then made, insofar as I dismissed the claim by Mr and Mrs Murphy for relief under the Contracts Review Act (see [2001] FCA 500).  The questions arising under the Contracts Review Act were remitted to me for determination. 

2                     On 14 December 2001, for reasons that I delivered on 7 December 2001 (“my Second Reasons” – see [2001] FCA 1725), I again ordered that the proceedings be dismissed insofar as relief was claimed under the Contracts Review Act.  Mr and Mrs Murphy appealed again to the Full Court.  On 16 May 2002, a differently constituted Full Court (“the Second Full Court”) concluded that my refusal of relief under the Contracts Review Act was affected by a misapprehension as to the facts.  The Second Full Court allowed the second appeal in part and again remitted the proceedings to me for determination in accordance with the reasons of the Second Full Court.  In these reasons, I shall use terms and expressions in the sense in which they were defined in my First Reasons and my Second Reasons. 

THE PRESENT ISSUE

3                     In my First Reasons (at paragraph [234]) I concluded that it was clear that, from March 1994 onwards, Overton was maintaining the position that, while until that time there had been an under-recovery of expenditure, Overton intended thereafter to seek to recover full reimbursement of all expenditure incurred in operating the Heritage Village.  Mr and Mrs Murphy accepted that they were able to manage the increase that took effect from 1 July 1994 and they were not actually called upon to bear any further increase in respect of any period before 27 November 1996.  I held, therefore, that they effectively had more than two years within which to rearrange their affairs, by disposing of their interest under the Lease, so as not to be in a position where they would be bearing maintenance fees beyond their means.  I did not identify a point at which a reasonable time would have elapsed for Mr and Mrs Murphy to have rearranged their affairs after March 1994.  I concluded simply that, whatever the period was, it had elapsed by November 1996. 

4                     The Second Full Court did not interfere with my conclusion that a reasonable time for Mr and Mrs Murphy to have surrendered the Lease had expired by November 1996.  However, their Honours observed that I did not make a finding as to when a reasonable time had expired from the time when Mr and Mrs Murphy ought to have been aware of the fact that the outgoings of which they were informed prior to entering into the Lease did not represent the full entitlement of Overton to require contribution to outgoings. 

5                     The effect of the arrangements relating to units in the Heritage Village may be summarised as follows:

·        Upon the grant of the Lease, Mr and Mrs Murphy were to pay the sum of $215,750 by way of Lease Price.

·        Twenty-five per cent of the Lease Price, being the sum of $53,937.50, represented Total Rent for the first five years of the Term granted by the Lease.  Under clause 13 of the Trust Deed and clause 4 of the Lease the Total Rent was to accrue to Overton and be appropriated monthly.  If the Lease terminated before the expiration of the first five years, the unappropriated Total Rent was to be refunded to Mr and Mrs Murphy.  The appropriated Total Rent was to be retained by Overton. 

·        No Rent, as such, was payable in respect of the balance of the Term. 

·        Upon termination of the Lease, the Lease Deposit, being seventy-five per cent of the Lease Price, namely $161,812.50, adjusted by reference to the Lease Deposit payable by any incoming lessee, was to be refunded to Mr and Mrs Murphy.  If the Lease Deposit payable by the incoming lessee was less than the sum of $161,812.50, the amount to be refunded would be reduced by the amount of the shortfall.  On the other hand, if the Lease Deposit paid by the incoming lessee exceeded the sum of $161,812.50, one-half of the excess was to be paid to Mr and Mrs Murphy.

6                     In my Second Reasons I concluded (at paragraph [90]) that there was no evidence that, if Mr and Mrs Murphy had disposed of the Lease within a reasonable time after March 1994, they would have realised an amount that was less than the consideration they had paid for its grant.  The Second Full Court concluded (at paragraph [137]) that, on the assumption that the value of Unit 53 was not significantly greater during the period from March 1994 to November 1996 than the Lease Price, Mr and Mrs Murphy would not have recovered the whole of the amount they paid to Overton had they disposed of the Lease at any time between March 1994 and November 1996. 

7                     If Mr and Mrs Murphy had disposed of their leasehold interest under the Lease before November 1996 they would have realised an amount in respect of Total Rent that was less than the amount they had paid.  On disposition of the Lease, Mr and Mrs Murphy would have been entitled to a refund of only that which the Trust Deed called “Refunded Rent”.  The amount of the “Refunded Rent”, as at the date Mr and Mrs Murphy disposed of the Lease, would depend on the time that had elapsed from the time of grant of the Lease to the date of disposition of the Lease.  Thus, by 27 November 1996, 49/60^ths of twenty-five per cent of the Lease Price (i.e. $44,048.96) had been appropriated by Overton.  The Second Full Court expressed the view, in the light of my Second Reasons, that I appeared not to have taken account of the operation of clause 13 of the Trust Deed and Clause 4 of the Lease. 

REASONABLE PERIOD TO DISPOSE OF THE LEASE

8                     By March 1994, Mr and Mrs Murphy were on notice of Overton’s position that the total recoverable expenditure, although not precisely quantified, was considerably greater than had been allowed for in current or past periods.  By March 1994, Overton had made it clear to all Lessees, including Mr and Mrs Murphy, that it intended to enforce its legal entitlement to recover full reimbursement of all expenditure incurred in operating the Heritage Village and that, to do so, it would be necessary to increase the maintenance fees substantially (see my First Reasons at paragraph [269]).  By March 1994, Mr Murphy could have been under no misapprehension as to the legal entitlement of Overton to recover from lessees, by way of maintenance fees, the full expenditure incurred by Overton in operating the Heritage Village (see my First Reasons at paragraphs [108] and [152-153]).

9                     No plausible explanation was offered as to why Mr and Mrs Murphy could not have rearranged their affairs within twelve to eighteen months from March 1994 and why it would not have been prudent for them to have done so.  Mr Murphy appreciated the possibility that, like at least two other Lessees, Mr and Mrs Murphy could have disposed of their leasehold interest had they chosen to do so.  In circumstances where those other Lessees had made arrangements to sell their interests between April and October 1994 and had, in fact, sold their interests by January and August 1995, there would have been no impediment to Mr and Mrs Murphy disposing of the Lease by October 1995. 

10                  However, Mr and Mrs Murphy contended that it would not have been reasonable for them to have disposed of their leasehold interest under the Lease at any time because they could not have done so without realising a loss.  It was said on their behalf that it would only have been reasonable to dispose of their leasehold if they could have realised an amount that was not less than the consideration that they had paid for the grant of the Lease.  It was said that they could never have realised more than that amount and, accordingly, that it was not reasonable to have disposed of the Lease at all. 

11                  Mr and Mrs Murphy contended, in the alternative, that it would not have been reasonable for them to surrender their leasehold interest under the Lease until:

·        they had explored fully the possibility of there being some resolution of their dispute with Overton concerning contributions to outgoings;

·        there had been a reasonable time after it became apparent that no such resolution was possible in order to look for alternative accommodation;

·        having found alternative accommodation, there had been a reasonable period to find a new lessee for Unit 53.

They say that those periods would not have ended before November 1996.

12                  In relation to the first period, they pointed to the fact that, as late as May 1996, Overton was foreshadowing total expenditure for 1996-7 of $618,120.  The 18.37 per cent increase, with which Mr and Mrs Murphy were comfortable, was based on the proposed budget for 1993-4 of $567,080.  It was not until November 1996, so it was said, that it became apparent that no compromise was to be reached.

13                  However, as I found in my First Reasons (see paragraph [153]), it was difficult to conclude that Mr Murphy was under any misapprehension as from 31 March 1994 as to Overton’s legal entitlement to recover the full expenditure occurred by Overton in operating the Heritage Village.  By that time, Overton was asserting that the total expenditure was greater than the amount included in the budget for the period ending 30 June 1994.  

14                  There may be a question as to whether Overton announced sufficiently clearly that it was no longer prepared to make any concession in that regard and whether it had indicated sufficiently clearly to Mr Murphy what the full extent of his liability would be, once any previous concession had been abandoned.  Nevertheless, I found that Mr Murphy was aware, before the end of 1994, that Overton was asserting an entitlement to recover, from Lessees, contributions to outgoings over and above the contribution provided by the increase of 18.37 per cent that took effect on 1 July 1994.  By 7 November 1994, it was clear to Mr Murphy that Overton was not in any way limiting claims for contribution to outgoing by reference to Consumer Price Index or any other factor.  Insofar as Mr Murphy had had the belief in April 1994 that the 18.37 per cent increase would have kept the accounts balanced until the Heritage Village had been completely built, that belief came to an end by November 1994.  By 14 November 1994, Mr Murphy had the clear belief that any hope that he may have had earlier in the year that the 18.37 per cent increase was going to be the last increase that he would see for some time, had been brought to an end –(see paragraphs [158] and [159]).

15                  In relation to the second period, Mr and Mrs Murphy pointed to the fact that they understood at the end of August 1992 that it would be anywhere from twelve to eighteen months before they would be offered accommodation in the John Paul Village, an alternative retirement village to which they gave consideration (see paragraph [60] of my First Reasons).  However, there was no evidence that there would have been any delay during the period from March 1994 to November 1996 in obtaining accommodation in the John Paul Village.  There was certainly no evidence directed to the availability of other alternative accommodation in that period.

16                  In relation to the third period, Mr and Mrs Murphy pointed to evidence as to:

·        units in the Heritage Village that were vacated during the period prior to 27 November 1996 and that remained vacant as at 2000;

·        units that had been surrendered and relet during the period 31 March 1994 to 27 November 1996.

However, the reasons for the vacancies and the surrender and reletting were not explored in the course of the hearing.  The evidence, therefore, leads nowhere.

17                  On the other hand, Overton pointed to evidence concerning the surrender of leases and reletting of comparable units between May 1994 and March 1996.  Mr and Mrs Stewart and Mr and Mrs Burnham set about finding new lessees for their respective units between April and November 1994.  Mr and Mrs Stewart were registered as lessees of Unit 18 on 27 April 1993 and surrendered their lease on 20 January 1995.  Mr and Mrs Burnham were registered as lessees of Unit 4 on 17 November 1987 and surrendered their lease on 25 August 1995.  Mr and Mrs Burnham and Mr and Mrs Stewart were each in a similar position to Mr and Mrs Murphy.  Each had received similar notice to that given to Mr Murphy that Overton intended to increase contributions to outgoings.

18                  In circumstances where Mr and Mrs Burnham and Mr and Mrs Stewart had made arrangements to surrender their leasehold interests between April and October 1994 and had, in fact, surrendered their leases by January and August 1995, there is no reason to conclude that there would have been any impediment to Mr and Mrs Murphy disposing of their interest in Unit 53 during 1994 and 1995.  They had ample time to rearrange their affairs by surrender of their leasehold interest under the Lease by October 1995.

19                  A period of 12 to 18 months would have been a reasonable period within which to make appropriate arrangements after Overton made clear to Mr and Mrs Murphy that the outgoings under the Lease for which they would be liable would exceed the amount for which they had believed they would be liable.  Accordingly, I conclude that it would have been reasonable for Mr and Mrs Murphy to have rearranged their affairs by March 1995 and certainly no later than October 1995. 

WHETHER MR AND MRS MURPHY WOULD HAVE SUFFERED A LOSS

20                  The relevant unjust consequence or result was that Mr and Mrs Murphy could be required to contribute to outgoings a greater proportion of their income than they had understood when they entered into the Lease.  There was no evidence that the value of the leasehold interest under the Lease was, at the time of entering into the Lease less than the consideration paid for its grant (see paragraph [89] of my First Reasons).  There was no evidence that the outgoings that Overton is entitled to recover are excessive for the benefits that flow from them.  There was no suggestion that the risk of the loss of Total Rent was in any way unjust.  That was a risk to which Mr and Mrs Murphy were always subject.  The only unjust consequence or result was having to contribute to outgoings a greater proportion of their income than they had understood they would be required to contribute. 

21                  To determine whether Mr and Mrs Murphy would have incurred a loss as a result of entering into the Lease and subsequently disposing of it prior to November 1996 would have required an assessment of the respective benefits and detriments derived by reason of their having entered into the Lease and having disposed of it prior to November 1996.  Those questions were not explored at the hearing.  Had those questions been raised, one would expect that evidence would have been adduced as to those benefits and detriments.

22                  For example, following elements might be regarded as making up the benefits derived from the arrangements:

(i)         the profit, if any, in relation to the Lease Deposit on surrender of the Lease;

(ii)        the value of occupation of Unit 53 for thirty-six months or, alternatively, the saving in accommodation costs during that period at some place other than the Heritage Village.

23                  The detriments might  be thought to be:

(a)        the contributions to outgoings that they would have made for thirty-six months from October 1992 to October 1995;

(b)        the loss of the use of the Total Rent paid in advance;

(c)        36/60^ths of the Total Rent, being the part appropriated for the period of their occupation;

(d)        any loss in relation to the Lease Deposit on surrender of the Lease;

(e)        the loss of the use of the Lease Deposit between payment and surrender.

24                  At the hearing there was no evidence nor any argument advanced concerning:

·        An appropriate interest rate to be applied in relation to loss of the use of funds during the period in question.

·        An appropriate adjustment to be made to the Lease Deposit upon surrender of the Lease, although it may be possible to draw inferences in relation to that matter.

·        The value of the right to occupy Unit 53 or the cost of alternative accommodation.

25                  The question of the loss of a proportion of the Total Rent was raised only obliquely at the hearing that led to my Second Reasons.  Even then, the question was raised only in written submissions in reply and in oral address in reply.  The matters referred to above were simply not explored in evidence or in oral submissions at the earlier hearings. 

26                  It may be possible to draw inferences concerning the operation of Clause 13(5) of the Trust Deed in relation to the Lease Deposit.  For example, I found that the value of Mr and Mrs Murphy’s interest in Unit 53, as at March 1994, was $215,000.  I also found that the value of their leasehold interest in Unit 53, as at November 1996, was $207,000.  One might draw a conclusion from the material that the amount of Lease Deposit refunded to Mr and Mrs Murphy, had they disposed of their interest between March 1994 and October 1995, would have been adjusted downwards.  However, that question was simply not litigated at the earlier hearings.  In the circumstances, I do not consider that it is appropriate to speculate, at this stage, on such a question.  I was not asked to do so prior to my First Reasons.  Nor was I asked to do so prior to my Second Reasons.

27                  Nor was I invited at the first hearing, or on any other occasion, to consider an appropriate rate of interest to take account of:

·        the loss of the use of the Total Rent paid in advance; or

·        the loss of the use of the Lease Deposit between October 1992 and the time when a disposition of the leasehold interest under the Lease might have occurred. 

There was no evidence as to applicable interest rates at any relevant time.  I do not consider it appropriate to speculate as to the appropriate rates of interest. 

28                  It would be necessary to consider what Mr and Mrs Murphy would have done with their money if they had not entered into the Lease, for example, whether they would have taken a unit in some other retirement village or whether they would simply not have sold their house at that stage.  Mr and Mrs Murphy adduced no evidence as to what they would have done with the sum of $215,750 paid by them by way of Lease Price as consideration for the grant of the Lease had they not entered into the Lease.  There was no evidence as to the cost of alternative accommodation to the Heritage Village.  There was no evidence as to the value of the right to occupy Unit 53, other than the rent that Mr and Mrs Murphy agreed should be applicable to that occupation during the first five years of the term granted by the Lease.  I do not consider that I can form a view as to whether Mr and Mrs Murphy suffered any loss as a consequence of entering into the Lease that could not have been avoided by disposing of it by October 1995.

29                  A clear distinction was drawn in the arrangements between Overton and Mr and Mrs Murphy between the amount of Total Rent and the amount of Lease Deposit.  The former was expressly attributable to the first five years of the Term.  The latter was refundable, subject to adjustment in the manner described above.  It is fair to conclude that, by the arrangements, the Lease Deposit was attributable to the balance of the Term after the expiration of the first five years of the Term.  There was no enquiry at the hearing as to the appropriateness of that apportionment and the considerations that led to that apportionment were not examined at all. 

30                  On the face of it, a disproportionate part of the Lease Price might appear to be attributable to the first five years.  That is to say, twenty-five per cent of the Lease Price is appropriated to five per cent of the Term.  Nevertheless, the express terms of the arrangements make clear that the right of Overton to appropriate the Total Rent accrued for only so long as Mr and Mrs Murphy remained in occupation.  Overton’s entitlement accrued from month to month at the rate of one-sixtieth of the Total Rent.  Clearly, Mr and Mrs Murphy derived a benefit by reason of their remaining in occupation for the first five years of the term of the Lease. 

31                  The entitlement of Mr and Mrs Murphy under the Lease included the right to exclusive occupation, as tenants, of Unit 53.  That exclusive right to occupation was a substantial benefit.  In order to secure the right to occupy Unit 53, Mr and Mrs Murphy paid the Lease Price.  The Lease Price was made up of the Lease Deposit and the Total Rent.  There was never any suggestion that the amount of Total Rent was not commensurate with the benefit of occupation.  The risk of loss of the Total Rent was one that Mr and Mrs Murphy accepted. 

32                  Rent is a contractual rendering made by a tenant to a landlord in consideration of the potential use of the lessor’s premises and in consideration for the conveyance of an interest in property.  The term “rent” can, and often does, mean a sum of money that a person has contracted to pay for the use of property for a term.  Rent is concerned with whether the payment, whatever its purpose, is part of the consideration for the right to use premises  (see Commissioner of Stamp Duties v J.V. Crows Nest Pty Ltd (1987) 7 NSWLR 529 at 538-9).

33                  Whether the payment of the Total Rent was a detriment in excess of the value of he occupation was not explored in the proceedings.  If Mr and Mrs Murphy had gone to the John Paul Village, or anywhere else, they would still have had to pay a sum to secure a right to occupy such other premises.  The likely cost to them of doing so was never explored and there was simply no evidence as to the value of the benefit that Mr and Mrs Murphy enjoyed by occupying Unit 53.  It is not possible to reach a conclusion that any detriment was suffered by Mr and Mrs Murphy by reason of Overton’s right to the Total Rent having accrued as consideration for Mr and Mrs Murphy’s occupation of Unit 53 for the first five years of the Term of the Lease. 

whether any RELIEF should be granted

34                  The finding that I have made is that the Lease was unjust in the circumstances relating to it at the time that it was made because of the failure by Overton to disclose to Mr and Mrs Murphy the fact that the maintenance charges that were then current did not represent a full recovery of the amounts which, under the Lease, Overton was entitled to recover from lessees.  There was procedural injustice because Mr and Mrs Murphy entered into the Lease under a misapprehension that the contribution for which they were potentially liable under the Lease represented a greater proportion of their expected income than they had believed. 

35                  By March 1994, any misapprehension as to that question was dispelled.  On the assumption that it was reasonable for Mr and Mrs Murphy to have surrendered their leasehold interest under the Lease within, say, eighteen months, namely by October 1995, they would have avoided any injustice.  The appropriate relief under the Contracts Review Act, to avoid the unjust consequence of the entry of Mr and Mrs Murphy into the Lease, would be an order that they not be called upon to pay a greater proportion of their income than they believed they would have to pay until they had had a reasonable opportunity to dispose of the Lease.  If they had surrendered their leasehold interest under the Lease by October 1995, they would not have been called upon to pay more than they believed they would be liable to pay. 

36                  In reaching the conclusion that it was not appropriate to make any order pursuant to s 7(1)(d) of the Contracts Review Act (see paragraph [91] of my Second Reasons) I had in mind the structure of the arrangements relating to the Heritage Village, as summarised in paragraphs [24] to [27] of my First Reasons.  In particular, I was mindful that, had Mr and Mrs Murphy disposed of their leasehold at any time after March 1994, the interest that they could have disposed of would have been less than the interest granted to them as consideration for the payment of the Lease Price.  That is to say, by March 1994, they had enjoyed exclusive operation of Unit 53 for approximately seventeen months.   By October 1995, they had enjoyed the right to exclusive occupation for approximately thirty-six months. They were only able to dispose of unexpired term of the Lease. 

37                  In my Second Reasons (at paragraph [90]) I observed that there was no evidence that, if Mr and Mrs Murphy had disposed of the Lease within a reasonable time after March 1994, they would have realised an amount that was less than the consideration they had paid for its grant.  The Full Court concluded that the accrual of Overton’s right to the Lease Rent was evidence to support a conclusion that Mr and Mrs Murphy would have realised less than they paid for the lease.  On reflection, the observation that I made at paragraph [90] is elliptical.  The interest of Mr and Mrs Murphy that could have been disposed of between March 1994 and November 1996 was something less than the interest that was granted in October 1992 in consideration for the payment of the Lease Price.  It was less, by reason of the effluxion of time.  It was no longer a ninety-nine year term but a slightly shorter term.

38                  It may be correct to say that Mr and Mrs Murphy would have realised, for the reduced Term that remained between March 1994 and November 1996, less than they paid for the full Term in October 1992.  However, since the parties appropriated the Total Rent to the first five years of the Term, and there was no evidence to suggest that that appropriation was inappropriate, there was no evidence that Mr and Mrs Murphy would have realised for the interest that they then had to dispose of, an amount that was less than the consideration they had paid for that interest. 

39                  The transaction between Overton, on the one hand, and Mr and Mrs Murphy, on the other, was entered into at arms length.  I am not persuaded there was evidence to support a conclusion that, if Mr and Mrs Murphy had disposed of the leasehold interest under the Lease by October 1995, they would have realised an amount that was less than the consideration they paid for the grant of that interest, simply by reason of the appropriation of Total Rent.  That is the only basis upon which the Second Full Court regarded it as appropriate to remit the proceedings. 

40                  In the course of the further hearing following the second remitter, counsel for Mr and Mrs Murphy advanced arguments that I regarded as new, in the sense that they had not previously been advanced in the proceeding, either in writing or orally.  Mr and Mrs Murphy contended that relief should be granted to them under the Contracts Review Act in the form of an order requiring Overton to enter into a deed.  The form of the deed, without annexures, is set out in Appendix 1 to these reasons.  It will be apparent from what I have said above that I do not consider that such relief is appropriate. 

41                  The essential contention was that, because it was not possible for Mr and Mrs Murphy to have surrendered the Lease at any time without incurring a loss, the only appropriate order that could be made for the purposes of avoiding any unjust result or consequence of entering into the Lease was an order that Overton pay to Mr and Mrs Murphy the difference between:

·        the Lease Price paid by them in October 1992, of $215,750, together with interest for that amount at the rate applicable under s 51A of the Federal Court of Australia Act 1976 (Cth); and

·        the value of the leasehold interest of Mr and Mrs Murphy under the Lease as at the date on which Overton ceased to be a manager, or a date as close as possible to that as the evidence permitted.

42                  Overton ceased to be the manager of the Heritage Village in June 2000, shortly after delivery of my First Reasons.  It was said by counsel for Mr and Mrs Murphy that they had not wished to involve Cuzeno, the purchaser of the reversion, in the litigation and, hence, contended that the cessation of the interest of Overton was an appropriate date.  Whether or not it was a reasonable decision not to involve Cuzeno in the litigation is not a relevant question for me.  However, there is no logical rationale for choosing that date as a date for determining the appropriateness of such a comparison.  There has been no suggestion that Mr and Mrs Murphy proposed to surrender the Lease at any time.  There is, of course, no evidence as to the present value of their leasehold interest.

43                  In any event, I do not regard such a contention as open to Mr and Mrs Murphy at this stage in the proceedings.  The basis upon which the proceedings were remitted required no more than an examination of the effect of the appropriation provisions in relation to Total Rent contained in Clause 4 of the Lease.

44                  I do not consider that there is material before me that enables me to conclude that the consequence of surrender by Mr and Mrs Murphy of their leasehold interest under the Lease at any time during the period March 1994 to October 1995 would have resulted in any loss.  They would have had the benefit of exclusive occupation of Unit 53 from October 1992 to the time of surrender.  They agreed that the rent attributable to that occupation was an amount equal to 1/60^th of the Total Rent per month.  They had agreed that they would take the risk of a capital loss in relation to the Lease Deposit and would share any capital gain in that regard with Overton. 

45                  Detailed written submissions were made on behalf of both parties.  Included in written submissions on behalf of Mr and Mrs Murphy is a section dealing with matters that were “formally put even though it is acknowledged that these matters have already been determined against the Murphys”.  I indicated that I did not propose to deal with submissions on that basis.  Either submissions were put at the earlier hearings or they were not.  If they were, it would be unnecessary to put them again “formally”.  If they were not, it would not be permissible to put the submissions at this late stage.

CONCLUSION

46                  In the circumstances I do not consider that the evidence supports a conclusion that, once Mr and Mrs Murphy had become aware during 1994 of the true circumstances relating to the lease at the time when it was granted, they could not have surrendered the Lease by October 1995.  The material before me does not enable me to conclude that, if they had surrendered the Lease within that time, there would have been any unjust result.  It follows, in my opinion, that each application, in so far as relief is claimed under the Contracts Review Act, should be dismissed with costs.  I propose to invite the parties to bring in short minutes to give effect to my conclusion, having regard to the orders made the Second Full Court.

Associate:

Dated:              5 August 2002

Appendix 1

THIS DEED DATED                                                                                    2002

BETWEEN:               OVERTON INVESTMENTS PTY LIMITED                (ACN 002 731 455) (hereinafter referred to as “Overton”) a company incorporated in the State of New South Wales and having its registered office c/- Pannell Kerr Foster, Chartered Accountants of Suite 301, 304-318 Kingsway, Caringbah in the State of New South Wales, of the one part;

AND:                          JOHN JAMES MURPHY AND DAPHNE MURPHY (hereafter referred to as “the Murphys”) of Unit 53 33 Bernard Road Padstow Heights in the State of New South Wales, of the other part;

WHEREAS:

A.                             Overton was the registered proprietor of land on which is situated the Heritage Retirement Village and also was the Manager of the said Village at all material times up to 29 June 2000.

B.                             On 20 October 1992, the Murphys as Lessees entered into a ninety-nine year lease with Overton to lease unit 53 at the Heritage Retirement Village for a Lease Price of two hundred and fifteen thousand seven hundred and fifty dollars ($215,750.)

C.                             The Federal Court of Australia in Proceedings No 159 of 1999 has:

(i)                  declared that the lease is unjust within the meaning of s. 7 of the Contracts Review Act 1980 (NSW); and

(ii)                ordered that Overton execute this instrument on the basis that by so doing it has the effect so far as is possible of avoiding the unjust consequences of the Lease.

D.                             On 29 June 2000, Overton transferred its interest in the land on which the Heritage Retirement Village is situated to Cuzeno RVM Pty Limited (hereafter referred to as “Cuzeno”.)

NOW THIS DEED WITNESSES, AND IT IS AGREED AND DECLARED AS FOLLOWS:-

1.                              Overton shall, within 28 days, pay to the Murphys the sum of $6,225.98 being that part, which related to abnormal legal and accounting costs payable under the Lease, of the Windeyer J judgment debt dated 23 April, 1999, together with interest at Supreme Court interest rates, from the dates when the said judgment debt was paid, until the date of repayment.

2.                              Overton is not entitled to recover as outgoings any of the invoices set out in the last Statement by Overton to the Murphys, dated 24 July, 2000, a copy of which is attachment “A” to this Deed, other than those invoices described as unit outgoings.

3.                              Overton shall, within 28 days, pay to the Murphys the sum of $___  , which sum is the difference between the Lease Price paid by the Murphys to acquire their leasehold interest in Unit 53 at the Heritage Retirement Village on 20 October 1992 together with interest thereon from that date, and the value of their leasehold interest as at the date of the hearing before Emmett J, on the basis that the level of outgoings was $132.42 per week, together with interest thereon from 29 June 2000,

4.                              Insofar as the Murphys are liable to Cuzeno for any outgoings set out in Attachment A, Overton indemnifies the Murphys for all such liability.

IN WITNESS WHEREOF this DEED was executed on the day month and year first herein written

SIGNED, SEALED AND DELIVERED

for and on behalf of

OVERTON INVESTMENTS PTY LTD

(ACN 002 731 455) by its corporate

officers in the presence of:-

………………………………………

Signature of Witness

………………………………………

Print Name of Witness

SIGNED SEALED AND DELIVERED

by the said JOHN JAMES MURPHY

in the presence of:-

………………………………………

Signature of Witness

………………………………………

Print Name of Witness

SIGNED SEALED AND DELIVERED

by the said DAPHNE MURPHY

in the presence of:-

………………………………………

Signature of Witness

………………………………………

Print Name of Witness