Blackler v Felpure Pty Ltd

[1999] NSWSC 958

Reported Decision: [2000] 9 BPR 17,257
[2001] ANZ ConvR 166
(2000) NSW ConvR 55-921

New South Wales

Supreme Court

CITATION:	Blackler v Felpure Pty Ltd [1999] NSWSC 958 revised - 26/06/2000
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	2951 of 1991
HEARING DATE(S):	13 and 14 September 1999
JUDGMENT DATE:	24 September 1999
PARTIES :	Di Michelle Blackler v Felpure Pty Ltd
JUDGMENT OF:	Bryson J at 1

COUNSEL :	J. McKenzie for Plaintiff D. Warren for Defendant
SOLICITORS:	Graham Klonis & Co. for Plaintiff Vosnakis & Associates for Defendant
CATCHWORDS:	LANDLORD & TENANT - exercise of option to renew lease - notice given by lessee to managing agent of lessor - validity of notice - authority of managing agent to receive notice - determined by terms of lease; - Retail Leases Act - whether operation of s.35 is subject to s.16 - s.35 not limited by s.16 - duty of good faith of lessor in exercising rights under s.35; - Interpretation of lease - vacant possession - practicable - substantial.;
ACTS CITED:	Retail Leases Act 1994 Conveyancing Act 1919 Supreme Court Rules Pt7 r8
CASES CITED:	Setena Pty Ltd v Perpetual Trustee Nominees (Canberra) Ltd (1987) NSW ConvR 55-322 Kratzmann (Toowong) Pty Ltd v Marjorie's Investments Pty Ltd [1986] ANZ ConvR 803 Oscars Town Centre REstaurant Pty Ltd v Port Shores Pty Ltd (1987) NSW ConvR 55-331 Wong & Ors v Silkfield Pty Ltd [1999] HCA 48 at 27 Quinlan v Avis (1933) 149 Law Times 214 Kushner v Law Society [1952] 2 All ER 404 Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 Dainford Ltd v Lam (1985) 3 NSWLR 255 at 268 Di Salvio v Manthorpe [1965] NSWR 360 at 361-362. Re Affairs of Farquhar (1943) 2 All ER 781 Lee v Nursery Furnishings Ltd (1945) 1 All ER 387 Adsett v K & L Steelfounders and Engineers Ltd (1953) 1 All ER 97 Heath v Drown [1973] AC 498 at 516-517
DECISION:	See para 65

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON J.

FRIDAY 24 SEPTEMBER 1999

2951/91 DI MICHELLE BLACKLER v FELPURE PTY LTD

JUDGMENT

1 HIS HONOUR: These proceedings were commenced on 30 June 1999 and heard with expedition. In the Amended Summons the plaintiff claims a declaration that she duly exercised an option for renewal of lease, specific performance of the agreement to lease arising on exercise of the option, a declaration that the lease has been extended to 30 June 2000 by ss.7 and 16 of the Retail Leases Act 1994, a declaration that a notice of termination given about 14 December 1998 and purportedly terminating the lease on 30 June 1999 had no effect, and injunctions restraining interference with her occupation. She also claims damages and costs. In the Cross-claim the defendant claims possession and also declarations in the contrary sense to those claimed by the plaintiff. 2 Lease 0463564 relates to the premises being the ground floor of 365 Port Hacking Road, Caringbah. The building also contains an upper-storey which has been used as an office although at present it is vacant; the plaintiff has never had any interest in the upper-storey. The Lease was granted to the plaintiff by the then registered proprietors, John Cheung Chiu Tse and Ping Tse; the land in Folio 3/26093, Lot 3 Deposited Plan 26093 at Caringbah, in the Sutherland Shire, Parish of Sutherland and County of Cumberland. The Lease was duly registered. The shop is situated centrally in the Caringbah Shopping Centre and is used for the Permitted Use designated by the Lease, that is Pizza and Pasta Bar. Pizzas and food to take away are prepared and sold at the front of the premises where there is a pizza oven and a shop counter, and meals are also prepared in the kitchen to the rear of the premises and supplied to diners in the restaurant area behind the shop. 3 The relationship between the parties is affected by the Retail Leases Act 1994 and the terms of the Lease show that the parties adverted to this. The term created was for three years commencing on 1 July 1995 and terminating on 30 June 1998 with a first option to renew for three years and a second option for a further three years. Provisions of the Lease which require special notice are as follows:

Section 1 relates to definitions and interpretations. Clause 1.01 provides:


In this Lease unless a contrary intention in any particular provision appears:

(a) “the lessor” includes its successors, assigns, servants and agents (including for the purpose of giving any notice , any Managing Agent appointed from time to time by the Lessor).’

Section 3 relates to the term and further terms. The first option is dealt with in cl.3.02 and the provisions now material are as follows:

If the Lessee desires to have a renewed Lease of the Premises granted to it for the further term stated in Item 1 of the Appendix (…) after the termination date and gives to the Lessor notice in writing to that effect not less than three (3) months prior to the termination date then (…) the Lessor shall grant to the Lessee a Lease of the Premises for the further term stated in Item 1 …”.

Section 7 relates to demolition and is in the following terms:
“7.01 If the lessor wants to demolish, substantially repair, renovate or reconstruct the building or the part of it containing the premises (that cannot be carried out practicably without vacant possession of the premises), and desires to terminate this lease as a result of such work, the lessor must provide the lessee with:
(a) sufficient details of the proposed works to indicate a genuine proposal
to carry them out within a reasonably practicable time after this
lease is to be terminated; and
(b) at least six (6) months, written notice of termination, unless the term
is twelve (12) months or less in which case the notice must be at least
three (3) months.
7.02 After the lessor has given written notice of termination under clause 7.01, the lessee may terminate this lease at any time within six (6) months before the termination date in the lessor’s notice, by giving the lessor not less than seven (7) days written notice of termination (unless the term is twelve (12) months or less in which case the lessee may give its notice at any time within three (3) months before the termination date in the lessor’s notice).
7.03 If the lessor’s works are not carried out within a reasonably practicable time after the termination date in the lessor’s notice, the lessor is liable to pay the lessee reasonable compensation for damage suffered by the lessee as a consequence of the early termination of this lease, unless the lessor establishes that at the time notice of termination was given by the lessor there was a genuine proposal to demolish the premises within that time.”

Section 13 contains Miscellaneous Provisions and includes in cl.13.03 the following:
“13.03 Any notice or other document required to be given or served under this Lease may be given or served:
(a) in any manner described in s.170 of the Conveyancing Act 1919, or
(b) by certified post, or
(c) by means of any document exchange service of which the party to be served is a member;
…
And in the case of any notice or document required to be served or given by the Lessor to the Lessee the same may be signed on behalf of the Lessor by its Managing Agent, manager, property or estate manager, assistant property manager, secretary, assistant secretary or solicitor.”

4   At the time of the grant of the Lease I.G. Martyn Real Estate of Cronulla were the Managing Agents for Messrs Tse, the lessors. On 20 March 1998 the plaintiff gave a written notice of exercise of the first option to that firm, and receipt of the notice was acknowledged in writing by Mr M. Christian of that firm. The notice clearly indicated her wish to exercise the option. 5   On 26 March 1998 the defendant entered into a contract with Messrs Tse as vendors to buy the whole building. On 30 April 1998 I.G. Martyn Real Estate informed the plaintiff by letter “Once all arrears are brought up to date we are authorised by the current and new owners to exercise your option for a further four years pursuant to the terms of your current lease.” On 13 May 1998 the plaintiff paid up arrears of rent then due. 6   On 15 May 1998 the defendant completed its purchase from Messrs Tse and the transfer to it was registered soon after. Later the defendant disputed that I.G. Martyn Real Estate Pty Ltd had any authority to write on its behalf on 30 April 1998; but the strength of the plaintiff’s claim is not affected by whether the firm had that authority. The claim to be entitled to grant of a further lease for three years turns on whether she duly exercised her option by giving notice in the manner indicated; this is the only ground of dispute of her entitlement to an option which the defendant relied on at the hearing. 7   The plaintiff’s entitlement to grant of a further term on exercise of the first option depends on her having strictly complied with the conditions in cl.3.02 upon which the option was to be exercised. To do so it was necessary for her to give to Messrs Tse as the Lessor notice in writing not less than three months prior to the termination date, that is not less than three months prior to 30 June 1998 to the effect that she desired to have a renewed lease. The notice which she delivered to I.G. Martyn Real Estate was sufficiently clear in its terms and was given in the appropriate time. The ground of defence was that it is disputed that it was given to the lessor. 8   Clause 3.02 when expanded by inserting the definition of Lessor from cl.1.01(a) literally authorises giving the notice to the lessor or any of the other classes of persons including the Managing Agent appointed at that time by Messrs Tse. 9   The contention on behalf of the defendant was to the effect that the reference to the Managing Agent in the definition in clause 1.01(a) is made only for the purpose of any notice given by or on behalf of the lessor, and is not made for the purpose of the lessor’s receiving any notice, or for the purpose of the Managing Agent’s receiving any notice on behalf of the lessor. This contention rests on an alleged distinction between giving a notice and receiving a notice. 10   The defendant’s counsel referred me to two decisions of McLelland J in this Division in which his Honour considered the authority of Managing Agents to receive notice of exercise of an option in a lease. In Setena Pty Ltd v Perpetual Trustee Nominees (Canberra) Ltd (1987) NSW Conv R 55-322 McLelland J applied the terms of the definition of “the lessor” in a lease with some general similarities to that in the present case, although not in exactly the same terms. At 56,969/2 his Honour expressed this obiter view: “The management of property leased to tenants would ordinarily embrace the receiving of a notice from a tenant exercising an option of renewal of his lease, and in my view a Managing Agent of such property would, in the absence of proof of some relevant limitation to his authority, be presumed to have authority to receive such a notice. (cf Peers v Sneyd 17 Beav. 151, 51 ER 990, R v Chief Immigration Officer (1973) 1 WLR 141).” In Oscars Town Centre Restaurant Pty Ltd v Port Shores Pty Ltd (1987) NSW Conv R 55-331 McLelland J made further observations to the same effect. 11 Counsel also referred to Kratzmann (Toowong) Pty Ltd v Marjorie’s Investments Pty Ltd [1986] ANZ ConvR 803, a decision to the opposite effect. In Kratzmann (Toowong) Pty Ltd Moynihan J held that a notice of exercise of option which was to be delivered before the end of March 1986 and was placed in the post before 31 March and delivered by post on 1 April because of postal delays over Easter, was not delivered in due time. His Honour gave as an alternative ground that the lease did not provide and the evidence did not show that service of the notice on the managing agent was authorised, whether by the terms of the lease or by authority actually conferred by the lessor. Moynihan J did not deal with the general authority of managing agents or the authorities to which McLelland J referred in his decisions later in the same year. I should respectfully say that I find McLelland J’s view on the general authority of managing agents persuasive. The present proceedings are however disposed of without reliance on general considerations relating to the authority conferred on Managing Agents. In the present case the sufficiency of delivery of the notice to the Managing Agent appears from the express provisions of the lease. 12   In my opinion on a literal reading of cl.1.01(a) the inclusion of the managing director is an inclusion for the purpose of giving any notice irrespective of whether the notice is given by the lessor or to the lessor. There is no indication in the terms of the document that the inclusion of the Managing Agent is made only for the purpose of assisting the position of the lessor, and no indication that the inclusion was not made for the purpose of assisting the giving of the notice by any party other than the lessor. 13   The terms of cl.1.01 state that it is to be applied unless a contrary intention appears in any particular provision. Counsel was unable to point me to anything in cl.3.02 which could support the view that the document expressed a contrary intention with respect of that provision. Not only is there no indication of a contrary intention; there are strong contextual indications that the literal meaning of cl1.01(a) was the intended meaning. One is that in cl.3.02 the process of notifying the lessor of the exercise of the option is referred to in language which actually speaks of giving to the lessor notice - “… give to the lessor notice in writing to that effect …” and the notional insertion into that phrase of the definition of “lessor” simply picks up and continues the use of parts of the verb “to give”. 14   A further contextual consideration is the provision in the tailpiece of cl.13.03 which establishes the efficacy of the signature of a Managing Agent to any notice required to be served or given by the lessor to the lessee, leaving no work to be done by the reference in cl.1.01(a) to giving notices if it related only to notices emanating from the lessor. 15   In my opinion the plaintiff complied with the formal requirement relating to the delivery of notice to Messrs Tse and was, when the defendant became registered proprietor in or after May 1998, entitled to specific performance of the obligation to grant a renewed lease, by which the defendant is bound having regard to the registration of the lease. 16   On 14 December 1998 solicitors representing the defendants sent to the plaintiff by letter a notice in these terms:

“We act for the owner of the above property and are instructed our client proposes to substantially repair, renovate and reconstruct the building and such proposals cannot be carried out practicably without vacant possession of the premises.
Accordingly, our client desires to terminate the Lease and you should consider this letter as Notice of Termination. You are required to vacate the premises on or before 30 June, 1999 and take with you all tenant’s fittings and chattels.
We note our client proposes to completely gut the premises and carry out the following works: -
- install new shopfront;
- new electrical wiring;
- new plumbing works;
- new ceilings;
- removal of all kitchen equipment on the ground floor;
- install new toilet facilities.
Our client is proposing a complete refurbishment of both floors of the building and we again note that this cannot be carried out without vacant possession.”

17 This letter is plainly recognisable as a notice under s.35 of the Retail Leases Act 1994. I set out some provisions of that Act:

“7 This Act overrides leases
This Act operates despite the provisions of a lease. A provision of a lease is void to the extent that the provision is inconsistent with a provision of this Act. A provision of any agreement or arrangement between the parties to a lease is void to the extent that the provision would be void if it were in the lease.
16 Minimum 5 year term
(1) The term for which a retail shop lease is entered into, together with any further term or terms provided for by any agreement or option for the acquisition by the lessee of a further term as an extension or renewal of the lease, must not be less than 5 years. An agreement or option is not taken into account if it was entered into or conferred after the lease was entered into.
(4) This section does not apply to a lease that results from the renewal of an earlier lease pursuant to an option conferred on the lessee, so long as there was no break in the entitlement of the lessee to possession of the retail shop and the option was granted by the earlier lease or by an agreement entered into before or at the same time as that earlier lease was entered into.
35 Demolition
(1) If a retail shop lease provides for termination of the lease on the grounds of proposed demolition of the building of which the retail shop forms part, the lease is taken to include provision to the following effect:
(a) The lease cannot be terminated on that ground unless and until the lessor has provided the lessee with details of the proposed demolition sufficient to indicate a genuine proposal to demolish that building within a reasonably practicable time after the lease is to be terminated.
(b) The lease cannot be terminated by the lessor on that ground without at least 6 months written notice of termination.
(c) If notice of termination on that ground is given to the lessee, the lessee may terminate the lease by giving the lessor not less than 7 days written notice of termination at any time within 6 months before the termination date notified by the lessor.
(2) If the lease is for a term of 12 months or less, the period of 6 months in subsection (1)(b) and (c) is shortened in each case to 3 months.
(3) If a retail shop lease is terminated on such a ground and demolition of the building is not carried out within a reasonably practicable time after the termination date notified by the lessor, the lessor is liable to pay the lessee reasonable compensation for the lessor is liable to pay the lessee reasonable compensation for damage suffered by the lessee as a consequence of the early termination of the lease, unless the lessor establishes that at the time notice of termination was given by the lessor there was a genuine proposal to demolish the premises within that time.
(4) For the purposes of this section, demolition of the building of which a retail shop forms part includes any substantial repair, renovation or reconstruction of the building that cannot be carried out practicably without vacant possession of the shop.”

18 It appears to be an assumption on which the notice was given that the option had been duly exercised and that the plaintiff was not simply holding over after the expiry of the three year term without exercise of the option. 19 The defendant did not rely on any breach of covenant and so far as appears no notice was ever given under s.133E(2) of the Conveyancing Act 1919. 20 On behalf of the plaintiff it was contended that the statutory extension of the term of a retail lease to a minimum of five years brought about by s.16 operates so that a right to terminate the lease, such as the right to terminate the lease for demolition conferred by cl.7 and regulated by s.35, cannot be exercised so as to terminate the lease at any date before five years from its grant, in this case before 30 June 2000. 21 In approaching this question it is always necessary to keep in view s.7 of the Retail Leases Act and its avoidance of provisions in leases inconsistent with provisions of that Act. 22 The Lease as granted is not modified in its operation by subs.16(1) because the term of 3 years for which the lease was entered into together with the further two terms each of 3 years for which options existed is not less than five years. Subsection 16(2) does not operate to affect the term of the lease and nothing would have been achieved if a solicitor’s certificate under subs.16(3) had been obtained. . It appears from the terms of s.35 that s.35 does not operate and the further provisions for which it provides are not taken to be included in the lease unless the lease provides for termination on the ground of proposed demolition, but that if the lease does so provide, the provisions of the lease operate with the provisions which the lease is taken to include. Both must be complied with and if there is an inconsistency s.35 is to prevail The plaintiff’s argument would require that this is in some way inconsistent with the requirement of subs.16(1) to the effect that the term for which a retail shop lease is entered into must not be less than five years that the lease contains a demolition clause, and that the operation of the demolition clause together with the provisions which the lease is taken to include is inconsistent with subs.16(1) in so far as termination for demolition can take place less than five years after grant. 23 Counsel drew my attention to the decision of the King’s Bench Division in Quinlan v Avis (1933) 149 Law Times 214 where a lease was held to be a “valid lease for a term of not less than two years” although the tenant had an option to determine the lease before the expiration of two years. The point decided is generally similar to the point before me but the legislation was different and their Lordship’s ex tempore consideration was brief, and I do not derive any assistance from that decision. Kushner v Law Society [1952] 2 All ER 404 could be thought of as to a similar effect but the statutory context is even more dissimilar. 24 I was also referred to the discussion in “Commercial Tenancy Law in Australia” 2nd ed. 1997 by Dr Bradbrook and Dr Cross at p.21. 25 Sections 16 and 35 use two quite different basic concepts. The provisions of s.16 are built around the term for which a lease is entered into. The impact of s.16 depends on the provisions of the lease when the lease was entered into, and what the lease said then about the term for which it was entered into. The basic concept of s.35 is a provision for termination on the grounds of proposed demolition. For this concept to have any application the termination must take place before the expiry of the term for which the lease was entered into; the assumption of s.35 is that the term for which the lease was entered into is to be cut short, and s.35 imposes controls on the process of cutting it short. There is no guarantee in the Retail Leases Act that the term for which a retail shop lease is entered into will not, after it is entered into, be interrupted by any supervening event. There could be supervening events which bring the term to an end by conduct of a public authority such as resumption of the land, and there also could be supervening events which bring the term for which a lease is entered into to an end before the expiry of the term through the operation of provisions of the lease itself. Leases commonly contain express or implied provisions under which their terms can be brought to an end for breach of covenant; such provisions are not, as far as I have observed, regulated by the Retail Leases Act 1994, although they are regulated by the Conveyancing Act 1919. There could I suppose be provisions of other kinds under which a lease may be terminated; provisions for termination on the grounds of proposed demolition of the building are regulated by s.35, but provisions for termination on other grounds, if there are such provisions in leases, do not appear to have been regulated by the Retail Leases Act. 26 The Retail Leases Act provides a number of protections for lessees. It protects them under s.16 by fixing a minimum term for which a lease is to be entered into, and it protects lessees under s.35 by restricting the operation of demolition clauses. The provisions of the Act overall appear to me to show contemplation that there should be both minimum terms and also demolition clauses which potentially might bring the terms to a premature end. 27 The presence in the lease of cl.7 and its provisions for termination on the grounds of proposed demolition are not inconsistent with and in my view have no impact on the requirement of subs.16(1) relating to the length of the term for which the shop lease is entered into. The recognition, implied from the presence of s.35 in the Act, that leases may be terminated, but subject to its provisions appears to me to confirm that terminations of leases may take place without regard to whether a term of five years will have expired when termination of the lease on the ground of proposed demolition takes place. 28 On behalf of the plaintiff it was submitted that termination of the lease under the demolition clause is or is analogous to forfeiture of the term and that relief against this forfeiture is available. However there is no element of breach or default on behalf of the lessee, and no event which by any analogy could be considered a forfeiture or penalty or be the subject of equitable jurisdiction to grant relief. 29 The plaintiff contended that the notice dated 14 December 1998 purportedly under s.35 of the Retail Leases Act did not validly terminate the plaintiff’s lease. Although no evidence shows the exact date and manner of the plaintiff’s receiving the two letters of 14 December 1998 setting out the terms of this notice it was established by concession that she received them soon after that day and before the end of December 1998; so the notices were given in due time to terminate the lease on 30 June 1999 if they were otherwise effective. 30 It was contended for the plaintiff that a purpose for which s.35 was enacted is the protectin of the lessee and that the notice was given for a purpose for which such a notice may not be given. It was contended the purpose discernible from many provisions in the Retail Leases Act is protection of the lessee’s security of possession and the lessee’s interest in the goodwill in respect of the retail business. 31 It was further contended that the defendant is subject to a duty of good faith in exercising rights under cl.7 and s.35; counsel referred to the discussion of a contractual duty of good faith in the judgment of Sheller JA in Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349. It is quite clear from the evidence tendered on behalf of the defendant that a purpose of the defendant’s proposed works, referred to in its notice and said to constitute demolition within the extended meaning in subs.35(4), is to make the ground floor of the building suitable for occupation by the defendant as the business premises of its own real estate agency, and for letting out the upper storey. The works referred to in the notice, and other works which the defendant intends to carry out, will have the effect of making the building altogether unsuitable for occupation as a pizza and pasta bar, and suitable for the defendant’s real estate agency business. In my opinion it is required that the lessor in fact should have a genuine proposal to demolish the building within a reasonably practical time after the lease is to be terminated. It is quite clear as a matter of fact, and was not in substance disputed, that the defendant in the person of its principal Mr Savelle genuinely proposes to proceed with work, and to do so as soon as can be arranged so as to be able to move into the premises on the expiry of its present lease of premises nearby on 4 January 2000. 32 A duty of good faith in the exercise of its contractual right to terminate the lease should in my view be implied in the lease; the implication is readily made as it could not possibly have been the intention of the parties that the lease should be terminated on the mere delivery of notice asserting a particular intention but in the absence of any actual intention of that kind. Other principles which also support this conclusion are the principle requiring the exercise of contractual powers which may affect the rights of others to be undertaken in good faith for the purposes for which the power was conferred and at a more basic level the principle which vitiates fraud would deprive a notice asserting that there was an intention to demolish premises from any effect if in fact there was no such intention. However those situations do not relate to the present facts, and there is no reason why an intention of the defendant to occupy the premises itself, or it may be to lease them out to some particular identified person after the works have been carried out, establishes the exercise as not being carried out in good faith. The defendant can exercise its power to terminate the lease with a view to its own advantage; it is for purposes of that kind that contractual entitlements generally exist.
33 The effectiveness of the defendant’s supposed termination of the lease depends on whether the letter of 14 December 1998 meets the requirements of subs.35(1) para.(a), and whether the details set out in the letter actually constitute details of work which is to be treated as demolition under subs.35(4). 34 It will be seen from the expressions in subs.35(1) that a lease cannot be terminated without at least six months’ written notice of termination. That is to say, termination is a different act to giving written notice. Paragraph (a) operates on the act of terminating the lease; it does not prescribe what must appear in the written notice, and the requirement that the lessor provide the lessee with details of the proposed demolition could be complied with less than six months before termination and otherwise than in writing. There is no evidence that any details were in fact provided in any other way or at any other time than with the letter of 14 December 1998. What paragraph (a) requires, according to its express terms, is the provision of details, and that the details provided should be sufficient to indicate a genuine proposal. Although it is not expressly enacted that there must be a genuine proposal it is in my view a necessary implication that a genuine proposal must exist; it could not have been intended that the requirement could be satisfied by a provision of details which was untrue. 35 The effectiveness of the termination is to be decided upon the basis of what the details provided sufficiently indicate, not upon the basis of what the underlying proposal was. This fine distinction is of some importance in the present case because in December 1998 the defendant proposed and now still proposes to do further works which were not mentioned in the notice. The further works relate to extending the building, and the extension which is feasible and the further works have not been established because the defendant’s architect has not conducted an appropriate inspection. There is a need to obtain the Shire Council’s Development Consent for any such extension whereas the Shire Council may not require an application for Development Consent for the works specified in the letter of 14 December 1998. 36 The plaintiff’s counsel contended that the provision of details did not comply with para.(a) because some of the works which are proposed were not referred to. In my view the facts that the defendant proposes to do further works, and may do them subject to the need to obtain Development Consent, and proposed to do them at the same time as the works specified in the notice, do not establish that para.(a) was not complied with. It is not necessary for compliance with para.(a) to furnish every detail of the proposed demolition, and it is enough if the details provided are sufficient to indicate a genuine proposal to demolish. If that is indicated, it is not a defect in the provision of details that more is to be done. 37 It is in my view significant to consider the purpose for which the provision which the Lease is taken to include requires that details be provided. The requirement to provide details is not merely a formal step imposed in the lessor’s path, but the details are to be provided so that the lessee can come to a conclusion about whether the termination will be effective, and whether the lessee should accept that it will be effective or dispute it. The sufficiency of details provided should be tested in relation to that purpose. The question is whether the details provided are sufficient to indicate a genuine proposal to demolish the building; if they are not the termination cannot take place and if they are it will be effective no matter what other details of the proposed demolition exist or could have been provided. 38 There is on the evidence tendered by the defendant, particularly of Mr Sevelle no reason to doubt that there is a genuine proposal to do the work described in the letter of 14 December 1998, and to do further work subject to Development Consent, with the object of providing the defendant itself with office space in which to operate when its present lease expires on 4 January 2000, and also of creating enlarged office space in the upper storey which the defendant now proposes to let to its solicitor. There was no attack on the genuineness of this proposal and the proofs of it are clear. 39 The time when the demolition is to take place is not required by para.(b) of subs.35(1) to be provided in writing. That time is not one of the details which are required by para (a) to be provided, but is a characteristic of the proposal which the details are to indicate. The reference to a reasonably practicable time establishes a characteristic of the proposal; it does not establish one of the details which are required to be provided. The proposal indicated must be a proposal to demolish the building within a reasonably practicable time, not within a stated time, and to meet that requirement the proposal must be sufficiently well-developed and mature to proceed within a reasonably practicable time. A proposal which was immature or only partly formed or to which the lessor was not committed could not comply. All buildings eventually come to the end of their lives and have to be demolished, and it was necessary for para.(a) to circumvent manoeuvres such as terminating leases on the basis that the building would come to the end of its useful life in five or ten years’ time, or that the locality would come under redevelopment pressures in five or ten years’ time, so that the building would then have to be re-demolished. 40 In submissions relating to testing whether the details provided were sufficient to indicate a genuine proposal for a demolition falling within the extended definition in subs.35(4) the plaintiff’s counsel gave emphasis to the requirements that the repair, renovation or reconstruction be substantial, and that the work cannot be carried out practicably without vacant possession of the shop. In my view there can be no doubt that the particulars indicate a renovation which is substantial. Counsel referred me to several authorities in which the word “substantial” has had judicial consideration including Dainford Ltd v Lam (1985) 3 NSWLR 255 at 268 (Powell J) and to dictionary definitions, and since the argument I have seen observations in the judgment of the High Court of Australia in Wong & Ors v Silkfield Pty Ltd [1999] HCA 48 at 27. In my view the works described are substantial in any available shade of meaning. 41 Counsel also pointed out that “vacant possession” can refer to vacant physical possession or to legal possession of vacant premises; counsel referred to observations of Wallace J in Di Salvio v Manthorpe [1965] NSWR 360 at 361-362. Counsel referred me to the speech of Lord Kilbrandon in Heath v Drown [1973] AC 498 at 516-517 where his Lordship with the concurrence of the majority held that the reference to “obtaining possession of the holding” in s.30(1)(f) of the Landlord and Tenant Act 1954 (UK) was a reference to the legal right to possession. Although that provision deals with the generally similar subject of a lessor seeking to obtain possession where the landlord intends to demolish or reconstruct the premises, it is quite unlike subs.35(4) and the expression “vacant possession” is not used. 42 The context in s.35 of interaction between possession and carrying out building works points clearly towards “vacant possession” referring to vacant physical possession, and in that context legal entitlement to possession cannot be of significance. 43 “Practicably” is an adverb qualifying the verbal phrase “cannot be carried out in cl.35(1)(a) Counsel referred me to dictionary definitions of “practicably” and to the use of that word elsewhere in Pt.4 of the Retail Leases Act 1994. In the Macquarie Dictionary 2nd Revised Edition 1987 the first definition of “practicable” is “1. Capable of being put into practice, done or effected, esp. with the available means or with reasonable prudence; feasible.” Counsel also produced an extract from the New Shorter Oxford (which edition is this) Dictionary which gave the following definition “1. Able to be put into practice; able to be effected, accomplished, or done; feasible.” It will be seen that the Macquarie Dictionary introduces reference to action with available means or with reasonable prudence, which does not appear in the other definition. Counsel also referred me to the article in Fowler’s Modern English Usage 2nd ed. 1965. 44   I was also referred to case law in which “practicable” was considered in different statutory contexts: ReAffairs of Farquhar (1943) 2 All ER 781, Lee v Nursery Furnishings Ltd (1945) 1 All ER 387 and Adsett v K & L Steelfounders and Engineers Ltd (1953) 1 All ER 97 (Note). Context is important for the meaning of the word “practicable” and the statutory contexts in those cases were remote from the present. 45 Counsel for the Plaintiff contended that evidence shows that the work proposed can be carried out without disturbing the plaintiff’s possession or with minimal disturbances to the plaintiff’s possession if special measures are taken in the management of the building work, so that work is done during hours when the Pizza Bar and Restaurant are not open for business, and special measures are taken such as cleaning up dust and debris and covering work after each working day so that the premises will be available for trade. Of course measures like those would significantly increase the cost of the work and extend the time taken for its performance. In counsel’s contentions however the consideration that the legislation was, as many of its provision tend to show, enacted for the purpose of protection of the interests of lessees indicates that the force of “practicably” is that if it is feasible, by measures such as these, to carry out the work of renovation without obtaining vacant possession, it should not be said that the work cannot be carried out practicably without vacant possession. Counsel contended that the shade of meaning given by the Macquarie Dictionary, incorporating reference to the available means or with reason and prudence, is not the intended sense of “practicable” because of the overall purpose of the legislation, and because of the qualification of “practicable” by the word “reasonably” in other passages. In s.33(b), the tailpiece of s.34 and in s.35(1)(a) the expression “reasonably practicable” is used. 46 If subs.(4) of s35 bore a meaning in which work of renovation was excluded from the definition of “demolition” if the work could be carried out by adopting unusual working methods and times and incurring unusual expense I cannot see that the word “practicably” would actually be contributing anything to the meaning of subs.(4). It would be difficult to see a purpose for a provision which had the effect that if it is in any way physically possible to work around the tenant, regardless of the difficulties of so doing, the work is not demolition as defined, and if there were an intention to confer protection of that kind it could be expressed in a clear way. The use of the word “practicably” appears to me to invoke consideration and assessment of practical concerns such as time, expense and inconvenience and to turn attention away from theoretical exercises and from considering what could be achieved by unusual expedients. From time to time we encounter unusual or astonishing feats of construction and engineering, which can be achieved if resources are made available on an unusually lavish scale, and in ordinary language there is a gap between the possible and the practicable. 47 The plaintiff called the evidence of Mr Brian Bailey, a licensed builder with long experience. In his report he made comments on the work described in the letter of 14 December 1998 which show his view that renovation was not necessary, and he supported no more than painting. He said “I believe the premises could stay as they are (except for minor painting) for another five years.” He also said “I note all of the above could be updated if the lessors so wanted, but in no way would the lessee have to vacate the premises to do so. My company could carry out any of the required work necessary during the day as the restaurant does not operate until after 5.30 pm and closes Mondays. … I believe my company could modify the premises with minor disruption to the lessee and maintain their ‘quiet enjoyment’ of the premises while doing so.” 48 In oral evidence Mr Bailey said to the effect that if the business was still operating while the work proposed to be done was carried out the builder would spend two to two and a half hours cleaning at the end of each session of work. He would expect the cost to increase by approximately 30 or 40 per cent and the time would increase by 30 to 40 per cent. He said “I would not intend to do all the areas up at the one time. There would be areas left for them to work, and then we could be doing other areas.” There would have to be arrangements including dust covers in areas under work, and limits on the area used for seating. As the ceiling was pulled out there would be three or four men pulling the ceiling out and then the ceiling would be lined the next day. He pointed out that a different method could be adopted in which the existing ceiling was left in place and a new ceiling was put in place under it. He would expect to work so that electricity supply was not interrupted. He described a method of work on renovation of the toilets in which work would proceed progressively and some toilet would always be available; and this work would not take longer than three days. Mr Bailey accepted that stripping the ceiling plaster is a messy job and would create dust. He was cross-examined about the difficulties which might arise when removing fibro corrugated sheet roofing at the rear of the premises; this roofing contains asbestos. However I disregard that subject because, although the defendant does propose to do that work, it is not part of the matter under consideration because it was not referred to in the details provided in the notice of 14 December 1998. He accepted that it would be easier and cheaper to do the work if vacant possession were obtained, but he did not have a preference as he would charge more if restaurant trade continued. 49 In evidence the plaintiff described her trading routine; the shop trades between 5.30 pm and midnight, and sometimes later, from Tuesday to Sunday each week. If a public holiday falls on a Monday the shop trades then. The plaintiff and the chef usually arrive at about 3 pm and other staff arrive later, until 6pm. Pizzas are prepared in the pizza oven at the front of the shop, and pasta and veal dishes are prepared in the kitchen area; in the usual working method there is a pizza chef and also a kitchen chef. The plaintiff contemplated that she would continue to work if builders were coming and working on the premises, although she might have to cover up part of her usual restaurant or other working area. 50 The defendant called the evidence of Mr Chris Brown, a licensed builder with significant experience, although not for as long as Mr Bailey. Mr Brown’s building company entered into a contract with the defendant to perform renovations on 17 March 1999 relating to a Scope of Works which corresponds generally although not exactly with the works in the letter of 14 December 1998; the demolition and extension of the building were not included in that scope of works and the contract price was $48,600. He rescinded the contract as work did not commence on the contracted date 1 July 1999. In evidence he said “You couldn’t operate food preparation business while you were demolishing the ceilings.” In his description of his proposed working methods for replacing the ceiling, electric power would be disconnected before work was done, the ceiling would be stripped, then the roughing-in or chasing for new electric power would be carried out, then the new ceilings would be erected, then the electrical work would be fitted out. Electrical trades and ceiling trades could be accommodated so as to work more or less at the same time with give-and-take. He had experience of carrying out building works on shops and restaurants while the tenants were still in situ; in his experience it is possible to do the works while the tenants remain in by juggling and accommodating working hours. He said “… when the work was being done in the kitchen you would not be able to do any preparation in that area for food, or if you did, your hours of work would be that reduced that you would only probably be getting an effective 2 hours of work done a day.” At t.22:

“Q. So it is much more convenient to have everybody out and you just get an open go at it?

A. Yes.”

51   Mr Brown further said (t.22 to t.23):

Q. I think you answered ‘Both yes and no’. What problems as a builder would you see, or expect to experience having to do the work with the tenant in possession?
A. Your problems are doing the demolition around existing fittings that could be damaged as you pull down the ceiling. An awful lot of dust and debris is likely to be in the ceiling as you demolish it. Ceilings of that vintage tend to not be the easiest done in one piece, sometimes you will get a small section, sometimes you will pull half the ceiling down. Then you have the cleaning up factor which would have to be taken into account every afternoon, whereas if you had vacant possession you could get in basically and strip the whole ting and worry about the cleaning up process afterwards.
Q. Are there any occupational hazards?
A. There would be occupational hazards. In that part of the floor or with the floor coverings up you would have to make sure there were no areas where the tenants or customers could trip, that everything was sealed and safe from all the other trades, being electrical and plumbing. It would be quite an onerous additional load on your work load to make it, to tidy up and make it safe every afternoon.
Q. And you also indicated that working in the kitchen that you may only have an effective two hours work a day?
A. Yes.
Q. How much longer would the job take to do?
A. I think I would say it would add about 75 per cent of the time.
Q. And cost?
A. I would say about 70 per cent to the cost.
HIS HONOUR: Q. If you did have vacant possession, what time span would the work be expected to take?
A. I, I think I put eight weeks on my contract for the time for the work to be taken.
Q. And if you had to work around a tenant on the ground floor, what time span would you expect the work to take?
A. I would think 16 weeks.”

52   Later evidence shows that in special circumstances and with special measures he could achieve shorter working time, and he said (t.25):

“Q. And I take it when you told the Court that if you have to work around a tenant on the ground floor it wouldn’t matter if that tenant was Mr Savelle, for argument purposes, or the plaintiff, you could more or less double whatever the time was for vacant possession work?
A. But you would need vacant possession of some portion of that time to be able to do that.”

53   The plaintiff also called the evidence of Mr James Alan MacGillivray an architect of long experience. His evidence first dealt with the times required for carrying out the work, and its force is qualified because he has not carried out proper inspections or prepared plans. He expressed the view that vacant possession would be required for the work proposed to be carried out, particularly on the ground floor where the food preparation and sales business is conducted. The force of this view is limited because it was expressed in relation to paragraph 9 of the affidavit of Mr Savelle, the principal of the defendant, which set out the work proposed and included work not specified in the letter of 14 December 1998, including removing the rear wall and extending the premises. This difficulty persists throughout my consideration of the application of Mr MacGillivray’s evidence to the issues before me; he directed himself to more extensive works which might involve, for example, replacing the wooden floors, as well as demolition of the rear wall and extension of the building. When cross-examination (at t.31) took him to the parts of the work which are relevant he said to the effect that he had been directed to the terms of Mr Savelle’s affidavit. His view as to the need for vacant possession was exemplified by reference to Mr Savelle’s Item (b), in which if the timber floor boards of the first floor were not in good order they were to be removed and replaced with a concrete floor. This would be a far more extensive exercise than that referred to in the notice. It was however relevant that Mr MacGillivray said, of a number of items in the notice, to the effect that the job could be done without vacant possession but it would be extremely difficult (t31) and exemplified that as follows:

“A. There is some worrying issues, just pick on the ceiling, pulling the ceiling out, ground floor ceiling. We have got a restaurant in there - I don’t know what we will find when we pull the ceiling off, I know that there is dust in there. I have learnt just recently that the dust in these ceilings contains lead. I am quite sure that the council would have a lot of input into that situation where you have got a situation of health problems, health danger with, just on that one instance, the led that is in the dust that’s in the ceilings, getting over food or food preparation areas. There is other issues that arise. It is a building of the 1950’s vintage. Timbers - it’s probably a timber floor, I haven’t been in it, I don’t know - if it is a timber floor and built in the 50’s it would be quite likely that it’s got vinyl tiles in there. It’s probably likely that it has got vinyl tiles on the floor, vinyl tiles contain asbestos and you would need men in plastic suits cleaning the place up. Again that would be a hazard to the preparation of food and trying to work around it.”

54 In appraising the force of this passage I have to remember that there is in fact no evidence in the proceedings that the dust in the ceilings contains lead, and no evidence that there are vinyl tiles on a floor or that vinyl tiles contain asbestos. Mr MacGillivray, who has not inspected the premises at all, was speaking of potential hazards which might be encountered, and not of hazards which have been established to exist. That there are potentially such hazards has some relevance for deciding what is practicable, but very little force. 55 Mr Savelle the principal of the defendant described in evidence what he would want to do. “… what I want to do is put a Bobcat through the front of it and carry it all the way up the back.” To my mind it is quite clear that the work described in the notice can be done practicably without using a bulldozer to clear everything away. 56 I turn to assess what findings I should make on subs.35(4). To my mind the work described in the notice would inherently be very difficult to accommodate with continued operation of the plaintiff’s business. The work described would not be carried on with a view to continuing the use of the premises for the plaintiff’s business; it would be carried out so as to equip the premises for a completely different use. The opening words of the description in the notice “to completely gut the premises” are rather dramatic but they do not in fact convey much which can be comprehended about what the work is to be; that is to be understood from the later details. The work of installing a new shop front could easily be managed so as to cause very little disturbance with continuing business, as the new shop front would be pre-fabricated off-site, and could be installed in the course of an ordinary working day. The installation of new electrical wiring, involving chasing wiring into walls, and the installation of new plumbing works would involve very considerable difficulty and inconvenience for the conduct of the plaintiff’s business while the works were proceeding. The likelihood is that the plaintiff’s business would be interrupted for several days by new electrical wiring and new plumbing works. The removal of the ceilings and fixing new ceilings would create very large difficulties for the conduct of the plaintiff’s business. A great deal of dust and mess would necessarily be created by pulling down old ceilings. The whole of the premises would be not capable of being used for several days; it does not seem to me to be realistic to suppose that the work site could be cleaned up before completion of the work and that the premises could be put into position where a pizza bar and restaurant could be carried out, with the work of removing and refixing the ceiling still uncompleted. The dust and filth arising would be simply inconsistent with food preparation, and with conduct of shop selling food or a restaurant, and the incompatibility would continue for some days as a minimum. 57 The removal of all kitchen equipment on the ground floor is of course altogether inconsistent with the continuance of the plaintiff’s business. 58 The work to install new toilet facilities would be a considerable inconvenience but could be manageable by arranging the work progressively so that some toilet was always available. 59 Overall the work described could be performed without first completely removing the plaintiffs and her business , but the business would be disrupted for weeks or months and stopped it completely for days at a time. The costs and time involved would be greatly increased, variously estimated at between 30 and 40 percent and at 70 percent more cost and at 70 percent more and twice the time. At the end of the works the building as renovated would be completely unsuited for conduct of the plaintiff’s business, without any internal fixings, without a kitchen and in a suitable state for the conduct of a real estate office. 60 My finding on the facts is that the work described is substantial renovation that cannot be carried out practicably without vacant possession of the shop. In my finding the defendant in the letter of 14 December 1998 provided the plaintiff with details of the proposed work sufficient to indicate a genuine proposal to carry out the works within a reasonably practicable time after termination. 61 It is not my view open to contention by the lessee whether the lessor’s decision to demolish, repair, renovate or reconstruct the building is reasonable or appropriate; it is sufficient if there is a genuine proposal. Nor in my opinion is it open to debate whether the lessor could in some way modify the lessor’s proposal so as to continue to accommodate the lessee after the premises have been demolished, repaired, renovated or reconstructed. The opportunity to break a lease, retake possession and take advantage of the demolition clause is a contractual opportunity made available to the lessor by the terms of the lease itself, including the provisions notionally incorporated by s.35, it is not injurious to the lessor’s position whether the lessor has decided to take that advantage, and it is not relevant that the lessor has in view occupying the premises itself, or selling them after reconstruction, or leasing them again, even if the lease should be to business similar to the lessee’s. The demolition clause is a reality of the party’s relationship, and so is its potential operation to end the lease. 62 It was contended that the duty of good faith referred to Alcatel and the Retail Leases Act operating together make it impermissible to use the break clause when the underlying purpose is to put another occupant into possession. In my view this lease includes the break clause and it is not possible to say that by exercising rights under it the lessor is stepping outside the contemplated relationship. 63 The plaintiff’s counsel contended that I should not give judgment for possession on the Cross-claim because it was said that the cross-claimant did not comply with several provisions of the Rules of Court. One provision referred to was Pt.7 r.8 but upon the evidence no person other than the cross-defendant is in occupation of the premises; in particular there is no basis for finding that Mr La Grazia, who is referred to in evidence as Mrs Blackler’s business associate and as the chef of the restaurant, is in occupation. Counsel also referred to Pt.40 r.11 which does not apply as the cross-defendant has participated in the hearing, and to Pt.42 r.4 the only relevant operation of which is its requirement in subrule (2) of leave to issue a writ of possession, which I will consider forthwith on publishing these reasons. 64 Defendant’s counsel told me that on the cross-claim the defendant contended that damages for mesne profits should be assessed to $450 per week being the current rental rate. As the period to surrender of possession is not yet known, and as there may be some other damages question relating to the interlocutory injunction, I prefer to leave all questions of damages for further consideration. 65 Orders:

On the plaintiff’s claim
(1) Give judgment for the defendant with costs.
On the Cross-claim
(2) Declaration in terms of Claim 1
(3) Dismiss Claim 2.
(4) Judgment for possession as in Claim 3.
(5) Reserve further consideration of questions of damages.
(6) Order that the cross-defendant pay the cross-claimant’s costs of the Cross-claim.

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Last Modified: 06/26/2000