ADATIA PTY LTD v NAZBIT PTY LIMITED & ORS

Supreme Court of the Northern Territory of Australia Angel J
15, 20, 30 June 1989, at Darwin

PRACTICE & PROCEDURE - Summary Judgment - Whether real question to be tried - disputable legal issues.

REAL PROPERTY - Leasehold - Whether underlease for term of headlease effects assignment - whether covenant in underlease to pay rent survives assignment
- whether suitable for summary judgment.

Cases referred to:

Beardman v Wilson (1868) L.R. 4 C.P. 57 Burrell v Duncan [1957] St. R. Qd. 52
Coles v Federal Commissioner of Taxation (.;L,9 ) 132
C.L.R. 242
Fancourt v Mercantile Credits (1983) 154 C.L.R. 87.
Lewis v Baker [1905] 1 Ch.46
Milmo v Carreras [1946] K.B. 306
Preece v Corrie (1828) 5 Bing. 24; 30 R.R. 536 Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 C.L.R. 17
Shell v Zanelli [1973] 1 N.S.W.L.R. 216
Theseus Exploration NL v Foyster (1972) 126 C.L.R. 507
White v Kenny [1920] V.L.R. 290
Whitham v Bullock [1939] 2 K.B. 81

Counsel for the Plaintiff	J. Reeves Solicitor for the Plaintiff	Poveys

Counsel for the Defendants		A. Wyvill Solicitor for the Defendants	: Close & Carter

ang89007
IN THE SUPREME COURT
OF THE NORTHERN TERRITORY OF AUSTRALIA

No. 542 of 1988

BETWEEN:
ADATIA PTY LIMITED
Plaintiff

and
NAZBIT PTY LIMITED
and

JOHN VASTA and PAULA RITA VASTA
Defendants

CORAM: Angel J

EXTEMPORE REASONS FOR JUDGMENT
(Delivered the 30th day of June 1989)

This is an application by a plaintiff for summary judgrnent pursuant to Order 22 of the Supreme Court Rules.	Under the Rules I have a number of options.	The parties have not requested that I summarily dispose of the whole action by consent, so there remains the choice of dismissing the application, giving judgrnent to the plaintiff for the whole or part of its claim, or giving the defendants leave to defend the whole or part of the claim,

The action concerns a claim by a plaintiff "underlessor" against the first defendant "underlessee" and other defendants as "guarantors" of the first defendant.

I use the parentheses because the defendants defend the claim on the basis that as a conclusion of law there is an assignment of the term of the headlease by virtue of the coincidence of termination of the terms of both the headlease and the underlease.

It has been said that the power to order summary or final judgment is one that should be exercised with great care, and that it should never be exercised unless it is clear that there is no real question to be tried: Fancourt v Mercantile Credits (1983) 154 C.L.R. 87 at 99.
See also Theseus Exploration NL v Foyster (1972) 126 C.L.R.
507.	The authorities make it clear that the defendants should be given leave to defend if there is a difficult and substantial question of law which ought not to be determined without full argument.

The plaintiff for the purposes of argument has conceded that, the expiry of the term of the "underlease" coinciding with that of the headlease, the transaction is to be treated as an assignment.	This is generally dealt with in Halsbury: Laws of England, 4th Edn Vol 27 paragraph 121;	Woodfall: Landlord and Tenant, 28th Edn, paragraphs

1-1743 and 1-1763,	Chernov: Tenancy Law and
Practice in Victoria, 2nd Edn (1980) Chapter 15,	Hope, Mackerras and Freeman: Landlord and Tenant (New South Wales) 7th Edn (1971), 155, and Sackville and Neave: Property Law, Cases and Materials 4th Edn (1988) Chapter 11, particularly paragraph 11.7.

The plaintiff has argued that notwithstanding the assignment, an "underlessor" is able to sue for rent on the covenant to pay which survives the assignment, and has principally relied on Milmo v Carreras (1946] K.B. 306 at
310 per Lord Greene MR, and Lewis v Baker (1905] l Ch 46, a decision of Swinfen Eady J, as he then was.	However, statements to the effect that the covenants, as a matter of contract, survive the common law rule that an underlease for a term equalling or exceeding that of the headlease effects an assignment, are at least debatable.

In Burrell v Duncan (1957] St.R.Qd.52, a decision of the Full Court of Queensland, it was held that a lessee in such circumstances was a stranger to the land without privity of estate or any rights in respect of the land.	The plaintiff in that case failed in respect of an action based on breaches of covenants of the sublease.
Furthermore, Swinfen Eady Jin	Lewis v Baker, supra, relied on the case of Preece v Corrie, (1828) 5 Bing.24; 30 R.R.
536, but that case is perhaps of doubtful authority,

•

particularly_after the decision in Beard.man v Wilson (1868)
L.R. 4 C.P. 57; and see foot ote 9 in the passage of Halsbury previously cited and Whitham v Bullock [1939] 2
K.B. 81.

Whitham v Bullock, supra, involved the assignment of a term of one part of the land to one party and of the term in the residue of the land to another party.	At page 86 the Court of Appeal, having declined to decide the status of the covenants in the case before it, said:

"It will no doubt be borne in mind that authorities on the operation of covenants relating to rent, may not necessarily conclude questions upon the scope of the action in debt for rent".

That case was referred to by Mason J, as he then was, in Coles v Federal Commissioner of Taxation (1975) 132 C.L.R. 242 at 252.

Today's increased emphasis on the contractual aspect of leases (after Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 C.L.R. 17; and see (1988) Mon.L.R. 83)
shall have to be borne in mind when coming to a decision upon the authorities I have mentioned.

I further note that whether the registered underlease in the present case constitutes an assignment of the registered lease at least arguably raises the question of merger.		There is authority to the effect that so long as a lease remains on the register, apparently as a distinct interest, then it must be regarded as a separate interest:	Shell v Zanelli, [1973] 1 N.S.W.L.R. 216.

In short, the question for decision in the present case depends on arguments supportable each way by the authorities and the authorities themselves appear debatable.	The question of the status of the covenants apparently remains open on the authorities, and on an application for summary judgment such as this, it is unsuitable that a final decision be made upon it.

The present claim is for rent, or includes a claim for rent, pursuant to the covenants in the "underlease" and damages in respect of alleged breaches of other covenants, for example, to reimburse for the costs of preparation of documents.	The claim does not presently encompass a claim for rectification on the basis that what was truly intended was an underlease as opposed to an assignment of the headlease, and the present case might, in that regard, be compared with White v Kenny [1920] V.L.R.
290, where the Chief Justice of Victoria was prepared to imply a term less one day in order to save the transaction

as an underlease, as opposed to an assignment of the headlease.

Nor is the present claim one for reimbursement from the underlessee in respect of rent paid by the underlessor to the head lessor.		I note that even if the transaction in the present case, to use a neutral expression, is by way of assignment as opposed to a lease and underlease, and even if the underlessor is not liable to be directly sued by the head lessor for the rent, that nevertheless an action for reimbursement in equity may still well lie in that regard:	Whitham v Bullock, supra.

There being, in my view, clearly disputable legal issues which should go forward for full argument together with the factual issues that were, but only for present purposes, conceded by the plaintiff, the application for summary judgment should be dismissed.

My formal order is that the application be dismissed, that unconditional leave be granted to the defendants to defend and no order as to costs.	I direct that the transcript be recorded and put on the court file and be made available to the parties.	Certified fit for
counsel.