FEDERAL COURT OF AUSTRALIA

Le Breton v Pacific Mirage Limited (No 2) [2013] FCA 691

THE COURT ORDERS THAT:

1.    The parties agree draft short minutes of order consistent with these reasons.

2.    If the parties are unable to reach agreement so as to comply with order 1 by 23 July 2013, each party shall bring in draft short minutes of order consistent with these reasons and the Court will hear the parties at a mutually convenient time, with a view to making final orders.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BACKGROUND

1        The defendant (“Pacific Mirage”) is the lessee of certain land at Main Beach on the Gold Coast, Queensland, by virtue of a lease in perpetuity granted by the Crown commencing on 1 April 1988. Upon that land is erected a building called “Pacific Mirage” (“Building”). The Building comprises some 54 self-contained suites (“villas”) which Pacific Mirage sub-leases to its shareholders.

2        In order to sub-lease a villa, a person must purchase a specific shareholding in Pacific Mirage, which shareholding confers an automatic right of exclusive sub-leasing of that villa, for the exclusive use and benefit of that particular shareholder.

3        The applicant (“Ms Le Breton”) is the sub-lessee of Villa 43, being lots 343 and 443 on registered plans WD 6328 and WD 6329 respectively (“Sub-lease”). The Sub-lease also includes car parking space 67 on registered plan WD 6325. Ms Le Breton purchased her shareholding in Pacific Mirage and entered into the Sub-lease by way of deed of assignment from the original sub-lessee, Mr Constantine Payne, in 1998.

ORIGINATING PROCESS

4        By originating process filed 15 May 2012, Ms Le Breton applied for relief under s 233(1) of the Corporations Act 2001 (Cth), specifically paras (c), (i) and (j), presumably in reliance on s 232 of that Act which relevantly provides that:

The Court may make an order under section 233 if:

(a)    the conduct of a company’s affairs; or

(b)    an actual or proposed act or omission by or on behalf of a company; or

(c)    a resolution, or a proposed resolution, of members or a class of members of a company;

is either:

(d)    contrary to the interests of the members as a whole; or

(e)    oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.

5        Ms Le Breton relevantly sought the following relief:

(1)    A declaration that Pacific Mirage is liable for the ongoing maintenance, repair and upkeep of all planter boxes, garden areas, roof top and roof level areas, external balustrades, tiles, windows and doors on or part of the external balcony and roof top garden areas for all suites in the Building.

(2)    In the alternative, a declaration that Pacific Mirage is liable for the ongoing maintenance, repair and upkeep of all planter boxes, garden areas, roof top and roof level areas, external balustrades, tiles, windows, and doors on or part of the external balcony and roof top garden areas for the suite known as Villa 43.

(3)    That Pacific Mirage forthwith, at Pacific Mirage’s cost, do all acts and things to undertake all such necessary and prudent maintenance, repair and upkeep of all of Villa 43’s external areas including but not limited to Villa 43’s planter boxes, garden areas, roof top and roof level areas, external balustrades, tiles, windows, and waterproofing membranes.

(4)    That Pacific Mirage be restrained from seeking, except by way of a contribution to Pacific Mirage’s sinking fund in the ordinary course of business, to recover from Ms Le Breton, by any other means, the costs of the works undertaken in compliance with order (3) above.

(5)    An order that Pacific Mirage pay Ms Le Breton’s costs of and incidental to these proceedings.

6        Ms Le Breton also sought interlocutory injunctive relief to restrain the holding of an extraordinary general meeting of the members of Pacific Mirage scheduled for 16 May 2012 or, in the alternative, an order for the meeting scheduled for 16 May 2012 to be adjourned pending final determination of this proceeding. That interlocutory application was dismissed: Le Breton v Pacific Mirage Limited [2012] FCA 505.

7        Section 232 of the Corporations Act no longer appears to be relied upon. Certainly the evidence filed by Ms Le Breton discloses no conduct, actual or proposed act or omission or resolution or proposed resolution contrary to the interests of the members of Pacific Mirage as a whole or, oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members of Pacific Mirage and nothing of the kind was pressed by Ms Le Breton on the hearing.

8        The only issue agitated on the hearing was the proper construction and interaction of various provisions of the Sub-lease, specifically whether Pacific Mirage or Ms Le Breton had responsibility for the repair and upkeep of all planter boxes, garden areas, roof top and roof level areas, external balustrades, tiles, windows and doors on or part of the external balcony and roof top garden areas for Villa 43.

THE SUB-LEASE

9        The premises the subject of the Sub-lease from Pacific Mirage to the sub-lessee are described in the preamble thereof in the following terms:

…HEREBY SUBLEASES to CONSTANTINE PAYNE of P.O. Box 41, Flemington Markets, in the State of New South Wales (hereinafter with his executors’ administrators and permitted assigns called “the Sub-lessee”) all that part of the Building being the suite numbered A343 and A443 and car park or car parks numbered A067 the location of which said suite and car park or car parks is more particularly shown and delineated and outlined in red on the copies of plans of survey Nos. WD 6328 and WD 6329 and of the Third, roof level and the basement level of the Building annexed hereto and marked with the letters “A”, “B” and “C” respectively set out in the Second Schedule hereto (herein collectively called “the Suite”).

10        Annexure “A” is a plan of the third level, A337–A354, having the words “second floor” printed at its base and having the following notes written in hand:

NOTES:

1.    It is stipulated that the uncovered parts of the Leases on this level, extend to the centre line of the ceiling above only.

2.    The boundaries of each lease as shown hereon are the centre lines of the constructed walls, floors and ceilings.

3.    For location of the buildings in relation to the boundaries of Lease A, see plan WD 6326.

4.    All levels are AHD, derived from PM 27132 RL 1.94.

11        Annexure “B” is a plan of the roof level, A437–A454, having the words “roof level” printed at its base and having the following notes written in hand:

NOTES:

1.    It is stipulated that the uncovered parts of the Leases on this level extend to the centre line of the ceiling above.

2.    The boundaries of each Lease as shown hereon, are the centre lines of the constructed walls, floors and ceilings.

3.    For location of the buildings in relation to the boundaries of Lease A, see plan WD 6326.

4.    All levels are AHD, derived from PM 27132 RL 1.94.

12        Annexure “C” is a plan of the basement level, A001–A031, A035–A052, A054–A068, having the words “basement level” printed at its base and having the following notes written in hand:

NOTES:

1.    The boundaries of each Lease as shown hereon, are the centre lines of the constructed walls, floors and ceilings.

2.    For location of buildings in relation to the boundaries of Lease A, see plan WD 6326.

3.    Basement Level – The boundaries of each Lease as shown hereon, are the centre lines of the constructed column etc as detailed in Diagram A.

4.    All levels are AHD, derived from PM 27132 RL 1.94.

13        Clause 1 provides:

1    (a)    The Sub-lessee shall have the right in common with the Sub-lessor and other tenants and occupants in the Building to use the pathways, entrance halls, stairs and passageways in the Building and the rooms if any in common use and such parts of the grounds improvements and gardens appurtenant to the Building as may be approved of by the Directors of the Sub-lessor.

(b)    The Sub-lessor and its other tenants shall be entitled to the free and uninterrupted passage of gas, water and electricity, sewerage and other services, drainage and storm water through and along the pipes and wires which are now or may at any time hereafter be in or passing through the Suite with power to the Sub-lessor its servants, contractors, workmen and agents at all times in case of emergency and otherwise at all reasonable times of the day to enter into the Suite for the purpose of inspecting, replacing, altering in any way or dealing with the said pipes and wires and the meters hereinafter mentioned and also of painting and repairing the outside wood and iron work and the exterior walls and roof of the Building.

14        Clause 3 relevantly provides:

3.    The Sub-lessee covenants with the Sub-lessor acting as principal on its own behalf and as the agent and trustee for the tenants of the other suites in the Building and for each of such tenants severally:

…

(g)    that he will not make or permit to be made any structural alterations or additions or paint or affix signs on or to the Suite or any part thereof of [sic] without the consent in writing of the Sub-lessor first had and obtained;

…

(i)    that he will at his own expense keep the Suite and all appurtenances therein in good condition and repair and the Sub-lessor shall not be answerable or chargeable for any decoration or repairs therein or thereto except as herein specifically provided;

…

(t)    if the Suite shall include an area on the roof level of the building, then the following terms and conditions shall apply in respect of that area:

(a)    The Sub-lessee shall pay to the Sub-lessor rental of $1.00 per annum payable only upon written demand under the Seal of the Sub-lessor such rental to be payable in arrears.

(b)    The Sub-lessee shall keep the Roof Garden in a clean and tidy condition at all times and use the same for recreation purposes only but not so as to create a nuisance or disturbance to other Sub-lessees of [sic] occupiers of the building.

(c)    The Sub-lessee shall place or install on the Roof Garden only such furniture or furnishings as shall have firstly been approved by the Sub-lessor it being the intention of the Sub-lessor that all furniture used on Roof Gardens be of a similar type and design to ensure uniformity of appearance, quality and design.

(d)    The Sub-lessee shall not damage or interfere with any shrub, tree, plant, flower or other vegetation planted or placed on the Roof Garden by the Sub-lessor and shall not plant any other vegetation or make any additions, alternations or place any other structures on the Roof Garden without the prior written consent of the Sub-lessor.

(e)    The Sub-lessor and its employees and contractors shall upon giving not less than twenty-four (24) hours’ notice thereof to the Sub-lessee or the occupier for the time being of the Suite to enter upon or pass through the Suite for the purpose of obtaining access to the Roof Garden in order to maintain plant or replace any vegetation on the Roof Garden and/or for the purposes of complying with its obligations under and in respect of the Memorandum of Articles of Association of the Sub-lessor and any of the Sub-leases granted by the Sub-lessor in respect of other Suites in the building.

15        Clause 4 relevantly provides:

4.    IT IS HEREBY AGREED AND DECLARED between the parties hereto:

…

(j)    That all Sub-leases of suites in the said building granted by the Sub-lessor shall contain substantially the same covenants and agreements as are herein set forth but with such modifications, if any, as the Minister for Lands or the Land Administration Commissioner may from time to time prescribe (either generally or for the particular case) before or at the time when any such Lease is entered into PROVIDED HOWEVER THAT sub-leases of suites on the Third Level of the Building may contain a licence for the sub-lessee thereof to use as a roof garden upon such terms and conditions as the Sub-lessor may determine that part of the roof of the Building immediately above the suite to which such Sub-lease relates.

…

(l)    If at any time during the continuance of the term hereby created or any further Sub-lease granted on renewal of the term thereof the Sub-lessor should desire to effect any further improvement to the land or the Building or to rebuild, repair, add to or replace the Building or to carry out any works, erections or constructions upon the land then the Sub-lessor, his Architects, builders, workmen and employees with appliances, equipment and tools of any kind shall have the right of full and free access ingress and egress into, upon and out of the land and the suite and to strengthen, repair or otherwise deal with the floors, walls, ceiling and all other structural parts of the Suite and to do all such other things as may in the opinion of the Sub-lessor be necessary or desirable to achieve the completion or rebuilding or construction of other purpose aforesaid PROVIDED THAT such work is performed and executed with a minimum of disruption to the Sub-lessee as shall be practicable in the circumstances.

16        Clause 5 relevantly provides:

5.    THE SUB-LESSOR COVENANTS WITH THE SUB-LESSEE as follows:

…

(c)    At all times during the continuance of this Sub-lease to keep the Building (other than the interior of the individual suites) and the common areas in a clean condition and in good repair having regard to their condition at the commencement of this Sub-lease;

(d)    The Sub-lessor shall keep in good repair the foundations, walls, supports, roofs, gutters, stairways, porches and main and principal pipes for carrying water or steam through the Building together with the main drain pipes also all existing plumbing and heating apparatus and the laundry, yard and common areas and all installations for the provision of services to the Building PROVIDED THAT the Sub-lessee shall give the Sub-lessor prompt notice of any repairs to be made and the Sub-lessee shall at all reasonable times allow the representatives of the Sub-lessor to enter and inspect the Suite for the purpose of determining the necessity and character of any such repairs and of making the same and upon reasonable notice to remove such portions of the walls, floors and ceilings of the Suite as may be required for the purpose of making such repairs and all portions so removed shall be replaced as soon as reasonably may be done in as good condition as before. All such repairs, shall be at the expense of the Sub-lessor unless rendered necessary by the act, negligence or carelessness of the Sub-lessee his servants and agents, licencees or invitees in which case the expense shall be borne by the Sub-lessee…

17        Clause 7 provides:

7.    If at any time during the continuance of this Sub-lease the Sub-lessor shall become entitled to and resolves in accordance with its Articles of Association to acquire an estate in fee simple in the land the Sub-lessee agrees that it will at any time hereafter if and when so required by the Sub-lessor execute all such transfers, assignments, assurances, surrenders and other documents and do all such other acts, matters and things (including but not limited to a surrender of this Sub-lease) as shall be requisite for or necessary for the purpose of fully and effectually vesting freehold title in the land in the Sub-lessor and in the event of any question arising as to whether any such transfers, assignments, assurances, surrenders, other documents, acts, matters or things are requisite or necessary the matter shall be settled by the nominee of the President for the time being of the Queensland Law Society Incorporated who may settle documents or obtain such settlement by counsel experienced in conveyancing matters. The parties acknowledge that it is contemplated that if the Sub-lessor acquires the estate in fee simple in the land, the parties will endeavour to procure the subdivision of the land and the Building into lots pursuant to the Building Units and Group Titles Act 1980 and subject to such other consents, permissions and provisions as may be required by law to the intent that the lot entitlement of the lot comprising the Suite shall bear the same proportion to the aggregate lot entitlement of all lots in the Building Units Plan that the voting entitlement of the Share bears to the total voting entitlement of all shares in the Company pursuant to the Articles and to the intent that each Sub-lessee of a suite in the Building shall pay that proportion of the total cost to the Sub-lessor of freeholding the land and procuring such subdivision as the voting entitlement of the Share to which each Sub-lease relates bears to the aggregate voting entitlement of all Shares in the Sub-lessor.

18        Clause 14 is a definition provision and relevantly provides:

In this Sub-lease unless such interpretation shall be excluded by or be repugnant to the context:

…

(f)    “the Suite” means the premises referred to in the commencement of this Sub-lease as “the Suite” identified in the plans annexed to this Sub-lease and marked with the letters “A” and “B” respectively and shall include the internal faces of all walls erected on the boundary of the premises and the internal faces of the ceiling and floors contained within those boundaries;

…

(h)    “suite” means an individual suite in the Building and includes the internal faces of all walls erected on the boundary of any such suite and the internal faces of the ceiling and floors of any such suite and shall include any garage spaces, lockers or other areas the subject of a sub-lease of a suite; …

PACIFIC MIRAGE’S CASE

19        At the forefront of Pacific Mirage’s case is that the definitions of “the Suite” and “suite” in cl 14 of the sub-lease are in conflict with paras 1 and 2 of the Notes endorsed on the plans in Annexures “A” and “B” and paras 1 and 3 of the Notes endorsed on the plans in Annexure “C” (see [10] to [12] above), but in particular the plan that is Annexure “B”. Indeed, the submission was made that the definitions are “so in conflict with paragraphs 1 and 2 of the Notes that those definitions are repugnant to the Notes”. It follows, it was submitted, that because the definition provisions in cl 14 are expressed to apply subject to being “excluded by or … repugnant to the context”, the cl 14 definitions are therefore read subject to, or are overridden by, paras 1 and 2 of Annexures “A” and “B” and paras 1 and 3 in Annexure “C” of the Notes.

20        All the submissions that follow are predicated on the correctness of this fundamental submission. The difficulty for Pacific Mirage’s case is that its fundamental submission is flawed, and its consequential submissions infected with error.

ANALYSIS AND CONSIDERATION

21        It may be accepted that the boundaries of the premises sub-leased to Ms Le Breton under the Sub-lease extend to the centre lines of the constructed walls, floors and ceilings. So much follows from the words of the preamble extracted in [9] above and the Notes, in particular para 2, on the plans that are Annexures “A” and “B” and para 1 on Annexure “C” (see [10] to [12] above). Moreover, so much is consistent with the position under the Building Units and Group Titles Act 1980 (Qld), s 9(5) of which provides:

In a building units plan, the common boundary of any lot with another lot or with common property shall be the centre of the wall, floor or ceiling, as the case may be.

While the Building is not registered under that Act, cl 7 of the Sub-lease reproduced in [17] above contemplates that if Pacific Mirage acquires the estate in fee simple in the land, the parties will endeavour to procure the subdivision of the land and the Building into lots pursuant to that Act. Having the boundaries of the sub-leases extend to the centre lines of the constructed walls, floors and ceilings would, no doubt, facilitate that process, and it is comprehensible that those responsible for the establishment of the Pacific Mirage scheme would have been so mindful.

22        But it does not follow that the perimeter of “the Suite” extends to the boundaries of the sub-leased premises notwithstanding the parenthetical words “herein collectively called ‘the Suite’”, which immediately follow the references to plans “A”, “B” and “C” in the preamble. Those parenthetical words are not definitional, but for convenient articulation; they are subsumed in the definition of “the Suite” in cl 14, first by reference to the premises so described and second, by the “carve out”, albeit by implication, of anything but the internal faces of the walls, floors and ceilings. The consequence of such a construction giving rise to a difference between the boundaries of the premises, the subject of the Sub-lease, on the one hand, and the perimeter of “the Suite”, on the other, is to be preferred to consequential conflict, amounting to alleged repugnance, in the interaction contended for by Pacific Mirage. The definition of “suite” later in cl 14 further supports the view that the perimeter of “the Suite” is not coterminous with the boundaries of the leased premises but is confined, so that while it includes “the internal faces of all walls erected on the boundary of the premises and the internal faces of the ceilings and floors contained within those boundaries”, it does not include anything beyond those faces.

23        Such a construction of what is and what is not “the Suite” for the purposes of the Sub-lease, creates a more harmonious context in which the operative provisions of the Sub-lease are to work and interact. That harmony provides for greater certainty of demarcation between what are the obligations of Pacific Mirage, on the one hand, and what are the obligations of the sub-lessee, in this case Ms Le Breton, on the other.

24        For example, sub-cl 5(c) of the Sub-lease makes it clear that it is the obligation of Pacific Mirage to keep the Building in a clean condition and in good repair, other than for the interior of the individual suites which, by virtue of sub-cl 3(i), is the responsibility and obligation of the sub-lessee.

25        Consistent with that demarcation, sub-cl 5(d) of the Sub-lease imposes an obligation on Pacific Mirage to keep the foundations, walls, supports, roofs, gutters, stairways, porches etc in good repair, and the power, upon reasonable notice to the sub-lessee, to remove such portions of the walls, floors and ceilings of the Suite as may be required for the purpose of making such repairs.

26        Again consistently, the last sentence of sub-cl 5(d) provides that all such repairs of the kind referred to in [25] above shall be at the expense of Pacific Mirage unless rendered necessary by the act, negligence or carelessness of the sub-lessee, his servants, agents, etc, in which case the expense shall be borne by the sub-lessee.

27        Because Villa 43 includes an area on the roof level of the Building, the provisions of sub-cl 3(t) are relevant. Under para (b) the obligation of the sub-lessee is limited to keeping the Roof Garden in a clean and tidy condition at all times. There is no definition of the term “Roof Garden” but having regard to the context in which the term is used in the following paragraphs of sub-cl 3(t), it clearly encompasses the whole of the floor area delineated within A443 on the plan that is Annexure “B” and all structures, such as planter boxes and pergolas, built thereon. The obligation to keep the Roof Garden, and such structures, in good repair is, by virtue of the provisions of sub-cl 5(c), the obligation of Pacific Mirage, the Roof Garden not being within the “interior” of the Suite within the parenthetical exception to sub-cl 5(c), nor within the sub-lessee’s obligations under sub-cl 3(1). The floor, walls and such structures as there are, are the roof of the Building.

CONCLUSION

28        For these reasons, I am of the view that Pacific Mirage is liable for the ongoing maintenance, repair and upkeep of all planter boxes, garden areas, roof top and roof level areas, external balustrades, tiles, windows and doors on or part of the external balcony and roof top garden areas for the suite known as Villa 43.

29        At this stage, I do not propose to make any orders or provide any other relief of the kind sought in the Originating Process. I propose to direct the parties to bring in draft short minutes of order consistent with these reasons but, if these cannot be agreed, for each party to bring in such short minutes of order. I will then hear the parties at a mutually convenient time, with a view to making final orders.

Associate:

Dated:    16 July 2013