APF Properties Pty Ltd v Robinson Investment Capital Pty Ltd
[2013] TASSC 59
•9 October 2013
[2013] TASSC 59
COURT: SUPREME COURT OF TASMANIA
CITATION: APF Properties Pty Ltd v Robinson Investment Capital Pty Ltd
[2013] TASSC 59
PARTIES: APF PROPERTIES PTY LTD
v
ROBINSON INVESTMENT CAPITAL PTY LTD
FILE NO: 843/2012
DELIVERED ON: 9 October 2013
DELIVERED AT: Hobart
HEARING DATE: 19, 20 June 2013
JUDGMENT OF: Blow CJ
CATCHWORDS:
Landlord and Tenant – Renewals and options – Relief against loss of option for renewal – Equitable jurisdiction – Inadvertent failure to exercise option on time.
Tanwar Enterprises Pty Ltd v Cauchi (2004) 217 CLR 315, applied.
Aust Dig Landlord and Tenant [132]
Trade and Commerce – Trade Practices Act 1974 (Cth) and related legislation – Consumer protection – Unconscionable conduct – Particular cases – Conduct of landlord after expiry of lease – Option for renewal not exercised – Value of premises previously paid by tenant to landlord.
Australian Consumer Law (Cth), ss21, 237(1).
Australian Competition and Consumer Commission vAllphones Retail Pty Ltd (2009) 253 ALR 324; Tonto Home Loans Pty Ltd v Tavares (2011) 15 BPR 29699, [2011] NSWCA 389, referred to.
Aust Dig Trade and Commerce [1057]
REPRESENTATION:
Counsel:
Plaintiff: M E O'Farrell SC
Defendant: K A M Pitt QC
Solicitors:
Plaintiff: Ware & Partners
Defendant: Simmons Wolfhagen
Judgment Number: [2013] TASSC 59
Number of paragraphs: 47
Serial No 59/2013
File No 843/2012
APF PROPERTIES PTY LTD v
ROBINSON INVESTMENT CAPITAL PTY LTD
REASONS FOR JUDGMENT BLOW CJ
9 October 2013
This case concerns a tenant's failure to exercise, on time, an option to require its landlord to grant a new lease. The landlord is the plaintiff, APF Properties Pty Ltd. It has brought an action seeking possession of the leased property on the basis that the tenant's lease has expired. The tenant is the defendant, Robinson Investment Capital Pty Ltd. It contends that, although the option was not exercised on time, there are circumstances that make it unconscionable for the plaintiff not to grant a new lease. It is seeking the equitable remedy of relief against forfeiture or, in the alternative, relief under s237 of the Australian Consumer Law. It contends that, in the circumstances, it would be appropriate for me to make an order under s237 requiring the plaintiff to complete a subdivision and transfer the leased property to it. The circumstances are unusual. The tenant has paid the landlord, by way of a lump sum payment of rent, an amount equal or approximately equal to the value of the leased land.
In the beginning, members of the Robinson family controlled three properties in north-west Tasmania. Nicolas Robinson owned a property named Broadmoor at North Motton. Kestrel Holdings Pty Ltd, which was controlled by members of the Robinson family, owned a property at Lower Wilmot and a property at Mannings Jetty Road, North Motton. Two businessmen from the Mildura area, Andrew Cottrell and Gary Andriske, wished to acquire the three properties for the purpose of growing pyrethrum. Negotiations took place. A letter of understanding dated 14 February 2001 was signed by or on behalf of each of the parties. Contracts for sale were executed about three months later. By a contract dated 11 May 2001, Nicolas Robinson agreed to sell Broadmoor to Mr Cottrell and Mr Andriske, or their nominee, for $1,040,000.
The Robinson family home was on Broadmoor. The contract for the sale of that property included a special condition – cl 15.2 – which provided for Nicolas Robinson to repurchase the homestead and some surrounding land after a subdivision. That clause, omitting certain provisions as to GST that are of no present relevance, read as follows:
"15.2The Purchaser agrees to sell and the Vendor agrees to repurchase the homestead on the Property together with its relevant land and improvements when it is subdivided by the Purchaser and this area including the homestead shall be the minimum amount permitted by the relevant Planning Laws and Regulations (hereinafter called 'the subdivided property').
To facilitate this sale and purchase it is agreed the Vendor shall at his cost be responsible within ninety (90) days of the completion of the purchase of the property to submit a Subdivision Plan to the Central Coast Council to achieve a separate Certificate of Title to the subdivided property and the Vendor undertakes to be diligent in its application process to ensure a timely resolution of the subdivision through the Council Planning process and the subsequent repurchase of the subdivided property.
The purchase price of the Subdivided Property will be equal to that stipulated in the Mantach Whitmore Valuations as follows:
$
1 House 101,880
2 Verandah 4,716
3 Deck 549
4 Car Port 5,625
5 Chattels 3,000
6 Site Improvements 3,000
118,770
Plus, if any cleared land is included in the Subdivided Property, the price for that part will equal the valuation price of $2,500.00 per hectare. If cropping land is included in the Subdivided Property, that land must be leased back to the Purchaser for a rental of $1.00 per year. Provided this sale is to be on a GST exclusive basis and the following conditions are to apply.
…
Its is agreed completion of the Vendors [sic] repurchase of the Subdivided Property from the Purchaser shall occur thirty (30) days from the Vendor or his Solicitor receiving notice of the Recorder of Titles acceptance of the Subdivision Plan and the issuing of a separate Title to the Subdivided land."
Those provisions of cl 15.2 repeated, with minor variations of no present significance, arrangements that were agreed to in the letter of understanding of 14 February 2001.
Mr Cottrell and Mr Andriske nominated the plaintiff to become the purchaser of Broadmoor in accordance with a provision in the relevant contract of sale. The sales of the three properties proceeded to completion, which took place on 11 August 2001. On 28 November 2001 the Robinsons' surveyors lodged with the Central Coast Council an application for the subdivision of Broadmoor, so as to create a new lot comprising about 20 hectares with the homestead on it. On 21 January 2002 the council refused that application, on the basis that the proposed subdivision was contrary to the provisions of its planning scheme, and in conflict with the State Policy on the Protection of Agricultural Land 2000. On 23 January 2002 the surveyors wrote to Nicolas Robinson advising that an appeal against the council's decision would fail, and recommending that no further action be taken.
Nicolas Robinson took legal advice in relation to the unsuccessful subdivision proposal. On 28 March 2003 he wrote to Mr Cottrell with a proposal for what he called a "99 year lease". That proposal was designed to take advantage of certain provisions in the Local Government (Building and Miscellaneous Provisions) Act 1993 ("the LGBMP Act"). That Act prohibits the subdivision of land without a council permit, but the prohibition does not apply to leases for less than 10 years. It seems that Nicolas Robinson's solicitors had developed a proposal for a 9-year lease, with 10 options for renewal for further terms of 9 years each, with a view to a tenant occupying the homestead area for 99 years without obtaining a council permit for a subdivision, and without contravening the LGBMP Act.
The prohibition on subdividing without a council permit is contained in s81(1) of that Act, which reads as follows:
"(1) An owner of land must not subdivide the land except in accordance with —
(a)a previously approved plan; or
(b)a plan of subdivision which has been approved by the granting of a permit under the Land Use Planning and Approvals Act 1993.
Penalty:
Fine not exceeding 50 penalty units."
However s80 contains a definition of "subdivide" which applies to Part 3 of that Act, which includes s81. That definition includes the following:
"subdivide means to divide the surface of a block of land by creating estates or interests giving separate rights of occupation otherwise than by –
…
(c)a lease of a term not exceeding 10 years or for a term not capable of exceeding 10 years …".
In his letter of 28 March 2003, Nicolas Robinson quoted the passages relating to the proposed homestead purchase from the letter of 14 February 2001, set out the history of the subdivision application and its rejection, and said:
"I have sought legal advice in Tasmania and the advice is such that a 99 year lease is the only way to ensure the intent of the Letter of Understanding is adhered to. Please find attached a draft lease document that outlines the various issues. If a 99 year lease could be executed the Robinson Group would be in position to forward APFI $123700 ($118770 for the improvements and $5000 for the 5 acres of land)."
With that letter, Mr Robinson forwarded a draft lease. It was not a 99 year lease. It was a 9 year lease with an option clause that provided for the granting of 10 subsequent leases, each of 9 years' duration.
Nicolas Robinson has a brother named Christopher. Christopher Robinson took over the negotiations from Nicolas. There was an exchange of emails between Christopher Robinson and Mr Cottrell. Mr Cottrell and Mr Andriske concluded that it would be fair to proceed as proposed by the Robinsons. There was no contractual obligation to grant a lease in lieu of selling the homestead and adjacent land. Nicolas Robinson did not have any contractual right to nominate anyone else to become the purchaser of the homestead and the adjacent land. However the plaintiff company, whose directors were Mr Cottrell and Mr Andriske, decided to grant the proposed lease to Robinson Investment Capital Pty Ltd, the defendant. Christopher Robinson is and was the sole director of that company.
The lease was in registrable form. It was subsequently registered pursuant to the Land Titles Act 1980. It was a lease for a term of 9 years commencing on 29 August 2003. The rent for the 9 years was $122,945, payable within three months of the date of the lease. That rent was paid. The area of the leased land was 1.67 hectares. The rental of $122,945 was equal to the purchase price that would have been paid if a sale of that land had proceeded in accordance with cl 15.2 of the contract. That sum represented $118,770 for the six items listed in that clause, plus $4,175 for the land (1.67 hectares at $2,500 per hectare).
The lease contained the following recitals:
"AThe Tenant sold the land comprised in Certificate of Title volume 3212 folio 6 to the Landlord on the condition that the homestead and curtilage would be subdivided and retained by the Tenant.
BThe Central Coast Council will not allow the subdivision set [sic] in Recital A.
CThe Tenant and Landlord have agreed to enter this agreement to fulfil the condition of sale."
The option clause – cl 3 – read as follows:
"3 Option
The Landlord will on the written notice of the Tenant made at least three (3) months before the expiration of the term created by this agreement and PROVIDED THAT there is not at the time of the request any existing breach or non-observance of any of the covenants or provisos on the part of the Tenant contained in this agreement at the expense of the Tenant grant to the Tenant a lease of the Premises and fixture [sic] and fittings (if any) for a further term of nine (9) years and containing the like covenants and provisos as are contained in this agreement with the exception that:-
(i)the present covenant for renewal shall only be applicable ten (10) times making a total tenure of 99 years.
(ii)the rental payable during the further terms shall be the sum of one dollar ($1.00) per annum."
The term of that lease expired on 28 August 2012. (At the trial it was assumed that it expired on 29 August 2012. However a lease for 9 years commencing on 29 August 2003 expires at midnight on the night of 28 August 2012.) Under cl 3, the defendant had the right to give notice exercising the option for renewal at least three months before the expiration of that term, ie no later than 28 May 2012. No such notice was given on or before that date. That was due entirely to inadvertence on the part of Christopher Robinson. The plaintiff did nothing to bring about the situation whereby notice was not given in time.
Before the lease expired, Christopher Robinson made an attempt to exercise the option. He wrote a letter, on the letterhead of the defendant company, in his capacity as the director of that company, addressed to Mr Cottrell as a director of the plaintiff company, saying the following:
"Re: Memorandum of Lease (99 years) Volume 3212 Folio 6, 403 Preston Road, Ulverstone, Tas.
Dear Sir,
Please find enclosed the consideration of one dollar per annum which equates to nine dollars for a further lease term of nine years as part of the lease terms."
He dated that letter "May 20, 2012". He sent with it a cheque for $9 in favour of the plaintiff company, dated "20/5/2012". He mailed the letter and cheque at Ulverstone. A photocopy of the envelope is in evidence. The postmark is hard to read. It was posted on either 9 June 2012 or 19 June 2012. I infer that Christopher Robinson backdated the letter and the cheque. I do not think he was trying to fool anyone. Although the letter was not ideally worded, counsel for the plaintiff accepted that it would have constituted a valid notice exercising the option if it had been mailed early enough. Since it was not mailed until June, it did not constitute a valid exercise of the option.
On 28 August 2012 the lease expired. Relations between the plaintiff company and the Robinsons had become acrimonious. In fact there had been a lengthy trial in the Federal Court in 2007 involving allegations of fraud, and misleading and deceptive conduct. On 31 August 2012 the plaintiff served on the defendant a notice requiring it to vacate the leased premises on or before 18 September 2012. The defendant did not vacate. On 26 September 2012, the plaintiff commenced this action.
Plainly the plaintiff must be entitled to possession of the premises unless I decide to grant equitable relief against forfeiture or some sort of relief pursuant to s237 of the Australian Consumer Law.
The defendant contends that, in all the circumstances, it is unconscionable for the plaintiff to refuse to grant a renewal of the lease, and for it to pursue its action for possession. In particular, the defendant contends that the plaintiff's conduct is unconscionable because of the following circumstances:
· The defendant paid the plaintiff $122,945, which represents the agreed repurchase price of the premises and 1.67 hectares of land.
· There was an understanding between the parties that the defendant was to be entitled to occupy the premises for 99 years, not just 9 years.
· The consideration for the years after the first term of 9 years was nominal.
· The defendant attempted to exercise the option within weeks of it losing its right to do so.
· No harm or loss has been caused to the plaintiff.
Relief against forfeiture as an equitable remedy
Counsel for the plaintiff submitted that the granting of relief against forfeiture as an equitable remedy would be inconsistent with the case law that has developed concerning that remedy.
Neither counsel nor I have been able to find any case, reported or unreported, in which relief against forfeiture was granted, as an equitable remedy, to a lessee who had neglected to exercise on time an option to renew a lease.
There are some authorities in which it has been suggested that, when a lease expires, and an option to renew has not been exercised within the required time, the tenant does not suffer a forfeiture against which a court of equity can grant relief, no matter how unconscionable the conduct of the landlord might be: Lennox v Cameron (1997) 8 BPR 15939, at 15954 (Bryson J, obiter); Saint John Shipbuilding & Dry Dock Co v Canada (National Harbours Board) (1983) 48 NBR (2d) 27 (New Brunswick Court of Appeal). However, I think the weight of authority is to the contrary: Samuel Properties (Developments) Ltd v Hayek [1972] 1 WLR 1296, at 1302 – 1307 and cases cited there; Leads Plus Pty Ltd v Kowho Intercontinental Pty Ltd (2000) 10 BPR 18085, at par[24] (Young J, obiter); Adelaide Leaseholds Inc v Oxford Properties Canada Ltd (1993) 44 ACWS (3d) 359 (Ontario Court of Appeal).
However, I think it is clear from the High Court's decision in Tanwar Enterprises Pty Ltd v Cauchi (2004) 217 CLR 315, that, in order for relief against forfeiture to be granted in the exercise of a court's equitable jurisdiction, it needs to be established that there has been unconscientious conduct within the limits of the developed principles of the equity jurisdiction, rather than "unconscientious conduct in some loose sense where all principles are at large", to use the words of Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ at par[20] in that case.
That case concerned some contracts for the purchase of land. Time had been made of the essence. The purchaser was unable to complete on an agreed new completion date because of a delay in obtaining finance. The vendors terminated the contracts. Finance became available the following day. Relief against forfeiture was refused at first instance. The High Court held that it had been rightly refused. Although the case concerned the forfeiture of a purchaser's interests under contracts for the sale of land, there is no reason why the principles expounded in that case should not be applied to the forfeiture of a lessee's interest under an option to renew a lease.
In the principal judgment in that case, Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ identified two inconsistent views as to the availability of relief against forfeiture that had emerged in Legione v Hateley (1983) 152 CLR 406. At par[36], their Honours concluded that the view of Mason CJ should be accepted. Essentially that view was that relief against forfeiture will only be available when the forfeiture has been caused or contributed to by unconscientious conduct by the party against whom relief is sought. In this case the plaintiff (the landlord) did nothing that caused or contributed to the defendant's loss of its right to exercise the option to require the grant of a new lease. It follows that equitable relief against forfeiture is not available in this case.
Relief under the Australian Consumer Law
Section 21 of the Australian Consumer Law, which is in Chapter 2 thereof, provides as follows:
"(1) [Unconscionable conduct prohibited] A person must not, in trade or commerce, in connection with:
(a) the supply or possible supply of goods or services to a person (other than a listed public company); or
(b) the acquisition or possible acquisition of goods or services from a person (other than a listed public company);
engage in conduct that is, in all the circumstances, unconscionable.
(2) [Application of section] This section does not apply to conduct that is engaged in only because the person engaging in the conduct:
(a) institutes legal proceedings in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition; or
(b) refers to arbitration a dispute or claim in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition.
(3) [Determining whether conduct is unconscionable] For the purpose of determining whether a person has contravened subsection (1):
(a) the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and
(b) the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section.
(4) [Parliamentary intention] It is the intention of the Parliament that:
(a) this section is not limited by the unwritten law relating to unconscionable conduct; and
(b) this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and
(c) in considering whether conduct to which a contract relates is unconscionable, a court's consideration of the contract may include consideration of:
(i) the terms of the contract; and
(ii)the manner in which and the extent to which the contract is carried out;
and is not limited to consideration of the circumstances relating to formation of the contract."
When unconscionable conduct occurs in contravention of s21(1), relief is available pursuant to s237 of the Australian Consumer Law. The relevant provisions of that section read as follows:
"(1) A court may:
(a)on application of a person (the injured person) who has suffered, or is likely to suffer, loss or damage because of the conduct of another person that:
(i) was engaged in a contravention of a provision of Chapter 2, 3 or 4; or
…
make such order or orders as the court thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct.
…
(2) The order must be an order that the court considers will:
(a)compensate the injured person, or any such injured persons, in whole or in part for the loss or damage; or
(b)prevent or reduce the loss or damage suffered, or likely to be suffered, by the injured person or any such injured persons."
The plaintiff company purchased Broadmoor for commercial purposes, operated it as a commercial farming property, and leased part of it to the defendant with a view to profit. No doubt its decision not to grant a new lease, but instead to try to regain possession of the premises, was also taken with a view to profit. Its conduct in relation to the leased land was not in the ordinary course of its business, but was still commercial in character. The terms "trade" and "commerce" are terms of the widest import: Re Ku-ring-gai Co-Operative Building Society (No 12)Limited (1978) 36 FLR 134 at 167. It was held in Bevanere Pty Ltd v Lubidineuse (1984) 7 FCR 325 that a company's sale of a capital asset, otherwise than in the ordinary course of its business, could amount to a transaction in trade or commerce. I think it must follow that the plaintiff's conduct in relation to the leased land was in trade or commerce.
It is common ground that the granting of a lease of the land in question would have amounted to the provision of a service for the purposes of s21(1). It follows that s21(1) prohibited the plaintiff from engaging, in connection with the possible granting of a second 9-year lease of the premises, in conduct that was, in all the circumstances, unconscionable.
Counsel for the plaintiff submitted that the plaintiff did not engage in any relevant conduct since the lease terminated automatically after the defendant failed to exercise the option. I reject that submission. On 31 August 2012, the plaintiff's solicitors wrote to the defendant company pointing out that the option had not been validly exercised, and returning the cheque for $9 for the next nine years' rent. Without saying so, that letter made it clear that the plaintiff would not grant a new lease. A notice to vacate dated 31 August 2012 was served on the defendant on behalf of the plaintiff company. Subsequently the plaintiff brought this action against the defendant, seeking possession of the leased property. The letter from the solicitor, the return of the cheque, the service of the notice to vacate, and the commencement of the action all amount to conduct on the part of the plaintiff in trade and commerce in connection with the possible supply of a new lease. It is therefore necessary to decide whether any or all of that conduct was, in all the circumstances, unconscionable and, if so, what relief, if any, should be granted.
It is very significant that s21(4)(a) has the effect that I am not constrained by case law from the equity jurisdiction in deciding whether particular conduct should be characterised as unconscionable. It is perhaps significant that the present version of s21, which commenced on 1 January 2012, was inserted into the Australian Consumer Law by the Competition and Consumer Legislation Amendment Act 2011 - a statute that was enacted after the High Court's decision in Tanwar Enterprises.
Subsections 21(1) and (2) are in very similar terms to s51AC(1) and (2) of the Trade Practices Act 1974 (Cth). The meaning of the word "unconscionable" in those subsections was considered by Foster J in Australian Competition and Consumer Commission v Allphones Retail Pty Ltd (2009) 253 ALR 324. His Honour said the following at par[113]:
"There is a body of authority in this court which establishes the following propositions:
(a)…The meaning of unconscionable for the purposes of s 51AC is not limited to the meaning of the word according to established principles of common law and equity …
(b)The ordinary or dictionary meaning of unconscionable, which involves notions of serious misconduct or something which is clearly unfair or unreasonable, is picked up by the use of the word in s 51AC. When used in that section, the expression requires that the actions of the alleged contravenor show no regard for conscience, and be irreconcilable with what is right or reasonable. Inevitably the expression imports a pejorative moral judgment: per Heerey, Drummond and Emmett JJ in Hurley v McDonalds Australia Ltd (2000) ATPR 41-741 ; [1999] FCA 1728 at [22] and 29. This helpful articulation of the meaning of the word when used in s 51AC was followed by Selway J in Australian Competition & Consumer Commission v 4WD Systems Pty Ltd (2003) 200 ALR 491 ; 59 IPR 435 ; [2003] FCA 850 at [183]–[185] (4WD Systems) and by Sundberg J in Australian Competition and Consumer Commission v Simply No-Knead Franchising Pty Ltd (2000) 104 FCR 253 ; 178 ALR 304 ; [2000] FCA 1365 at [30]; and
(c)Normally, some moral fault or moral responsibility would be involved. This would not ordinarily be present if the critical actions are merely negligent. There would ordinarily need to be a deliberate (in the sense of intentional) act or at least a reckless act: per Selway J in 4WD Systems at [185]."
Helpful reviews of the relevant authorities are also to be found in the judgment of Jessup J in Australian Competition and Consumer Commission v Lux Distributors Pty Ltd (2013) 133 ALD 134, [2013] FCA 47 at pars[6] – [10], and in the judgment of Zammit AsJ in Wolfe v Permanent Custodians Ltd [2012] VSC 275 at pars[307] – [320].
The authorities in relation to the meaning of the word were considered by the New South Wales Court of Appeal in Tonto Home Loans Pty Ltd v Tavares (2011) 15 BPR 29699, [2011] NSWCA 389. That case concerned the Australian Security and Investments Commission Act 2001 (Cth), but the Court took the view that the word did not have a distinct or different meaning in that Act from the equivalent provisions in the Trade Practices Act. At pars[291] and [293], Allsop P (as he then was), with whom Bathurst CJ and Campbell JA agreed, said the following:
"Aspects of the content of the word 'unconscionable' include the following: the conduct must demonstrate a high level of moral obloquy on the part of the person said to have acted unconscionably: Attorney General of New South Wales v World Best Holdings Ltd [2005] NSWCA 261; 63 NSWLR 557 at 583 [121]; the conduct must be irreconcilable with what is right or reasonable: Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226; 148 FCR 132 at 140 [30]; Australian Competition and Consumer Commission v Samton Holdings Pty Ltd [2002] FCA 62; 117 FCR 301 at 316-317 [44]; Qantas Airways Ltd v Cameron [1996] FCA 1483; (1996) 66 FCR 246 at 262; factors similar to those that are relevant to the CRA [Contracts Review Act 1980 (NSW)] are relevant: Spina v Permanent Custodians Ltd [2009] NSWCA 206 at [124]; the concept of unconscionable in this context is wider than the general law and the provisions are intended to build on and not be constrained by cases at general law and equity: National Exchange at 140 [30]; the statutory provisions focus on the conduct of the person said to have acted unconscionably: National Exchange at 143 [44]. It is neither possible nor desirable to provide a comprehensive definition. The range of conduct is wide and can include bullying and thuggish behaviour, undue pressure and unfair tactics, taking advantage of vulnerability or lack of understanding, trickery or misleading conduct. A finding requires an examination of all the circumstances.
…
… Spigelman CJ in World Best Holdings at 583 [121] referred to a 'high level' of moral obloquy. Whether that is too stringent and whether 'significant' or 'real' may be preferable need not be decided. What is required is some degree of moral tainting in the transaction of a kind that permits the opprobrium of unconscionability to characterise the conduct of the party."
It is common for a tenant to neglect to exercise an option for the grant of a new lease within the time specified in an option clause. In an ordinary case, when the tenant is paying regular instalments of rent to the landlord, and the landlord has not caused or contributed to the tenant's failure to exercise the option, those facts alone would not warrant characterising a refusal to renew the lease or an attempt to recover possession of the premises as unconscionable for the purposes of s21(1). There is ordinarily nothing immoral about a landlord taking advantage of a tenant's oversight in such a situation. However this is by no means an ordinary case.
In my view it is clear beyond doubt that the conduct of the plaintiff in not granting the defendant a new lease, and in seeking to recover possession of the land in question, was unconscionable. The plaintiff had been willing to sell the land to the defendant for the amount which the defendant subsequently paid to it. That amount was paid as part of an arrangement whereby the defendant was entitled to have rights to occupy and use the property for 99 years. Without deserving it, the plaintiff acquired a common law right to eject the defendant after nine years, and sought to exercise that right. Nothing had happened to make such conduct morally defensible. It was clearly unfair. It was clearly unreasonable. It showed no regard for conscience. It was irreconcilable with what was right and reasonable. The plaintiff's conduct should be characterised by the opprobrium of unconscionability.
Discretionary matters
But that is not the end of the matter. There are factors that may weigh against the granting of relief to the defendant under s237(1). I need to consider the defendant's conduct in failing to exercise the option to renew the lease, and its conduct in relation to the attempt to circumvent the provisions of the LGBMP Act.
When the plaintiff leased the premises from the defendant, it made a bargain whereby, if its tenancy were to continue for more than 9 years, it would need to exercise an option for renewal, and exercise it on time, every 9 years. As the High Court said in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2005) 218 CLR 471 at par[33], "Where parties enter into a written agreement, the Court will generally hold them to the obligations which they have assumed by that agreement." It was through inadvertence alone that the defendant lost its right to exercise the option for a grant of a new lease.
Counsel for the plaintiff submitted that it was the intention of the defendant to take a lease for a term of 99 years; that that arrangement contravened the LGBMP Act; that granting relief under the Australian Consumer Law would help the defendant to implement that arrangement; and that such relief should therefore be refused. He supported his argument by reference to the defendant's pleadings, in which it was asserted that the lease of the premises by the plaintiff in 2003 was granted pursuant to an "overarching agreement" for the granting of a 99 year lease. According to particulars set out in the defendant's counterclaim, that overarching agreement was constituted by Nicolas Robinson's letter of 28 March 2003 (referred to in pars[9] and [10] above) and four subsequent emails. Although Nicholas Robinson referred in his letter to "a 99 year lease", he made it clear that he was referring to a draft document that had been prepared as a result of him obtaining legal advice. The draft document was not a lease for a single term of 99 years, but a lease for a term of 9 years with 10 options for renewal. I very much doubt that the parties entered into a binding agreement for the granting of a lease prior to the execution of the lease in registrable form. I do not need to make a finding as to that. If they did enter into a preliminary "overarching agreement", it was not an agreement for the granting of a lease for a single term of 99 years. The fact that a draft lease for 9 years, with options, was forwarded with that letter makes it clear that the term "99 year lease" was simply a misnomer.
Although the parties neither entered into a 99 year lease nor agreed to do so, they did engage in conduct that was calculated to circumvent the provisions of the LGBMP Act. There is no reason to interpret the provisions of that Act as prohibiting the sort of transaction that these parties entered into. The critical provision is par(c) of the definition of "subdivide" in s80, which refers to "a lease of a term not exceeding 10 years or for a term not capable of exceeding 10 years". If parliament had wished any subsequent terms, provided for in an option clause, to be taken into account for the purposes of that definition, it could have said so. There is no reason to give the words of par(c) an extended meaning.
The option clause was therefore lawful. There is no reason why, as a matter of public policy, the lawful circumvention of the provisions of the LGBMP Act should be regarded as a factor that weighs against the granting of relief in this case.
Although the defendant's inadvertence is a relevant factor, it is very much outweighed, in my view, by the unconscionability of the plaintiff's conduct in refusing a new lease and seeking to recover possession of the premises. Relief should therefore be granted pursuant to s237(1).
Appropriate orders
At the time of the trial I was told that the relevant council had now granted a permit for the subdivision of Broadmoor, that an appeal from that decision had been instituted before the Resource Management and Planning Appeal Tribunal, and that that appeal had not been heard. I do not know whether that appeal has yet been determined, but I do not need to know. Counsel for the defendant submitted that, if I considered it appropriate to grant relief under s237, one alternative would be to order the plaintiff to withdraw the planning appeal and transfer the premises to the defendant. However I do not think that would be appropriate.
A transfer of the premises would give the defendant a number of advantages that it could not have obtained simply by exercising the option for the renewal of the lease. The plaintiff's reversionary interest in the premises would be extinguished; there would be no need to remember to exercise options at 9-year intervals; and the defendant would have a freehold property that it could mortgage or sell much more readily than a leasehold interest. Since the defendant got itself into this situation through oversight, I see no reason to make an order that would confer benefits upon it that it would not otherwise have had.
In my view the only appropriate order is one requiring the plaintiff to grant the defendant a new lease of the premises, in the terms that would have been applicable if the option had been exercised before it expired.
For these reasons, I have decided to make the following orders:
1 That judgment be entered for the defendant against the plaintiff on the claim.
2That the plaintiff grant to the defendant a new lease of the land that was the subject of Memorandum of Lease registered number C334383 for a term of 9 years commencing on 29 August 2012, containing the covenants and provisos that would have been required if the option conferred by cl 3 of the said Memorandum of Lease had been validly exercised.
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