Unclear Drafting Results in a Hard Stand against Removal of Hardstand

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The New South Wales Supreme Court last year demonstrated the need for landlords and their lawyers to draft clear and unambiguous clauses in relation to fixtures (i.e. hardstands) to be removed by the Tenant on termination of a lease.

The Case

In the case of Whitehouse Properties Pty Ltd v BP Australia Pty Ltd [1] , BP Australia Pty Ltd (the Tenant) leased land in New South Wales from Whitehouse Properties Pty Ltd (the Landlord) for use as a service station and convenience store.

The lease between the parties had expired, but the Tenant continued to occupy the premises and operate the service station and convenience store under the holding-over provisions of the lease, on a monthly basis.

In 2013, the Tenant ceased trading from the premises and terminated the lease. The Tenant proceeded to remove parts of the service station (including the convenience store, the underground tanks and associated piping) from the premises, however it did not remove the hardstand. The ‘hardstand’ being the paved area in front of the convenience store on which the pumps and canopy stood and which supported the weight of vehicles entering the service station.

A clause of the lease provided that the Tenant had the right to install fuel pumps, pole signs, underground storage tanks and other trade fixtures, which it must remove (and reinstate all damage done in the removal) on termination if requested by the Landlord.

The Landlord argued that the hardstand fell into the category of ‘other trade fixture’ for the purposes of this clause, and sought an order from the Court requiring the Tenant to remove the hardstand from the premises. The Tenant argued that the hardstand did not fall within this category.

The Decision

In the decision, the Court adopted the principles of Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2]. Namely, that the meaning of the terms of a commercial contract are to be determined by what a reasonable businessperson would have understood those words to mean. Also, that the language used by the parties, surrounding circumstances and commercial purposes or object of the contract are considerations for this purpose.

The Court also adopted the definition of ‘tenant’s fixtures’ from New Zealand Government Property Corporation v HM & S Ltd (the New York Star) [3] to help determine the meaning of ‘trade fixtures’ for the purposes of this lease. On this interpretation, the Court found that the hardstand was not a trade or tenant’s fixture. Rather, it was a structure of the service station, which could not be removed without destroying it.

It was further held that the words ‘fuel pumps, pole signs and underground storage tanks’ immediately preceding the words ‘other trade fixtures’ in the clause of the lease, inferred that trade fixtures were items that could be removed by the Tenant. Whereas, the hardstand could not be removed without it being destroyed.

The Court held that, if the parties had intended for the Tenant to remove the hardstand, then they should have expressly said so, rather than burying it in another clause relating to installation and removal of additional equipment by the Tenant.

Ultimately, the Landlord was unsuccessful, the hardstand remained on the premises and the Landlord had to pay the Tenant’s costs of the court action.

Accordingly, landlords need to ensure that express provision is made in a lease if the Tenant is required to remove a hardstand on termination. Ambiguous drafting in this regard, will generally be construed in the Tenant’s favour.

 

 

[1] Whitehouse Properties Pty Ltd v BP Australia Pty Ltd [2014] NSWSC 410.
[2] Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2014] HCA 7.
[3] New Zealand Government Property Corporation v HM & S Ltd (the New York Star) [1982] 1 WB 1145.

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