Block 27 Pty Ltd v Qursa Pty Ltd

In the Supreme Court of the Australian Capital Territory, the Full Court heard an appeal and cross-appeal concerning a dispute between Block 27 Pty Ltd (appellant) and Qursa Pty Ltd (first respondent), and a second respondent. The core of the dispute revolved around the interpretation and enforceability of covenants within a Crown lease, specifically an obligation to sublease or transfer car parking spaces to lessees of an adjoining premises. The Crown lease stipulated certain terms for these subleases, which the sublease granted by the previous proprietor of the Crown lease did not comply with.

The legal issues before the Full Court included whether a sublease could be interpreted to incorporate the requirements of the Crown lease, even where those requirements were inconsistent with the express terms of the sublease. The court also considered whether the equitable maxim "equity regards as done what ought to have been done" could operate to incorporate the Crown lease's requirements into the sublease, despite the inconsistencies. Furthermore, the court had to determine if the new proprietor of the Crown lease, Qursa Pty Ltd, was subject to the obligation to grant a complying sublease, and if their continued failure to do so constituted wrongdoing for the purpose of the equitable defence of "unclean hands". Finally, the court examined whether the Crown lease created a third-party benefit trust, allowing beneficiaries of the obligations to enforce them.

The Full Court reasoned that a sublease could not be interpreted to incorporate terms from the Crown lease that were contrary to its express provisions. The clause in the sublease requiring the sublessor to observe the covenants of the Crown lease was not broad enough to override the specific terms of the sublease where they conflicted. Consequently, the equitable maxim "equity regards as done what ought to have been done" could not be applied to deem the Crown lease requirements as incorporated. Regarding the equitable defence, the court held that Qursa Pty Ltd acquired the Crown lease subject to its terms and the liabilities of the previous proprietor. The continued failure to fulfil the obligation was considered wrongdoing, and given the broader public interest in upholding the purpose of the Crown lease, equitable relief was refused. The court also found no intention to create a third-party benefit trust, meaning the beneficiaries could not sue for enforcement of the obligations.

The Full Court dismissed the appeal and the cross-appeal. Each party was ordered to pay their own costs of the appeal. The first respondent was ordered to pay the appellant’s costs of the cross-appeal, with no order as to costs of the cross-appeal between the first and second respondents.