Casquash Pty Ltd v NSW Squash Ltd (No 2)

[2012] NSWSC 522

Supreme Court

New South Wales

Medium Neutral Citation:	Casquash Pty Ltd v NSW Squash Limited (No 2) [2012] NSWSC 522
Hearing dates:	7, 8, 9 & 11 May 2012
Decision date:	25 May 2012
Jurisdiction:	Equity Division
Before:	Pembroke J
Decision:	Summons dismissed. See paragraph [60]
Catchwords:	CONTRACT - objective theory - parties bound by signed contract - only limited exceptions CONTRACT - unilateral mistake induced by fraud, dishonesty or sharp practice - principles and remedies RECTIFICATION - entitlement to rectification when unilateral mistake induced by fraud, dishonesty or sharp practice LANDLORD & TENANT - notice under Section 129 Conveyancing Act - reasonable notice - notice not a "sacramental ritual" - reasonableness of time period RELIEF AGAINST FORFEITURE - breadth of statutory discretion - relevance of breach being monetary or non-monetary breach - acrimonious relationship - lease necessarily requires proximity and frequent mutual dealings - interests of justice
Legislation Cited:	Conveyancing Act 1919 Corporations Act (Cth) 2001 Work Health & Safety Act 2011
Cases Cited:	A Roberts & Co Ltd v Leicestershire County Council [1961] Ch 555 Best & Less (Leasing) Pty Ltd v Darin Nominees Pty Ltd (1994) 6 BPR 13,783 Byron Bay Retirement Villages Pty Ltd v Zandata Pty Ltd [2008] NSWSC 1123 Capital Projects (Qld) Pty Ltd v Trust Co of Australia [2008] QSC 105 Cherry Lane Fashion Group Ltd v Jam Factory Pty Ltd [1990] ANZ ConvR 120 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Easyfind (NSW) Pty Ltd v Paterson (1987) 11 NSWLR 98 Ell v Cisera (2000) 10 BPR 18,045 Ex parte Dally-Watkins; Re Wilson (1955) 72 WN (NSW) 454 Hace Corp Pty Ltd v F Hannan (Properties) Pty Ltd (1995) 7 BPR 14,326 Hayes v Gunbola Pty Ltd (1986) 4 BPR 9247 Hyman v Rose [1912] AC 623 Johnston v Arnaboldi [1990] 2 Qd R 138 Ladies Sanctuary Pty Ltd v Parramatta Property Investment Ltd (1997) 7 BPR 15,156 L'Estrange v F Graucob Ltd [1934] 2 KB 394 Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 Macquarie International Health Clinic v Sydney South West Area Health [2010] NSWCA 268 May v Platt [1900] 1 Ch 616 Pioneer Gravels (Qld) Pty Ltd v T & T Mining Corp Pty Ltd [1975] Qd R 151 R & J Lyons Family Settlement Pty Ltd v 155 Macquarie Street Pty Ltd [2008] NSWSC 310 Riverlate Properties Ltd v Paul [1975] Ch 133 Shiloh Spinners Ltd v Harding [1973] AC 691 Sparta Nominees Pty Ltd v Orchard Holdings Pty Ltd [2002] WASC 54 Stellar Mining NL v Evanel Pty Ltd (1983) NSW ConvR 55-118 Stieper v Deviot Pty Ltd (1977) 2 BPR 9602 Taylor v Johnson (1983) 151 CLR 422 Thomas v SMP International (No 4) [2010] NSWSC 984 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] 219 CLR 165 Total Destination Marketing Pty Ltd v Horizons Snowy Mountains Pty Ltd [2011] NSWSC 1575 Wilton v Farnworth (1948) 76 CLR 646
Category:	Principal judgment
Parties:	Casquash Pty Ltd - plaintiff NSW Squash Limited - defendant
Representation:	Counsel: P Bolster - for the plaintiff F Kunc SC - for the defendant Solicitors: Swaab Attorneys - for the plaintiff Thomas Hugh Walker - for the defendant
File Number(s):	2012/00124714

Judgment

Introduction

1. This case concerns a commercial lease of squash court premises. The plaintiff is the lessee and the defendant is the lessor. The lessor contends that the lessee is in breach of the lease. It has exercised its right of re-entry and now occupies the premises. The lessee contends that there has been no breach and that even if a breach has occurred, it is entitled to relief against forfeiture pursuant to Section 129 of the Conveyancing Act 1919.

1. Beneath the surface of the competing contentions of breach or no breach, there is an anterior question, namely the identification of the parties' agreement. Each contends for a different form of lease. There are two leases, both of which were executed. The second lease was registered. The plaintiff says it was mistaken about the first lease and the defendant says it was mistaken about the second lease. In both cases, the mistake relates to the liability for Council rates and outgoings. Each contends that the other is or should be liable for those expenses. Both seek rectification in one form or another. There was however no common intention. The question of liability for Council rates and outgoings was never resolved in the negotiations that took place prior to signing the first lease. Nor was it agreed prior to signing the second lease. Rectification on the conventional basis is therefore not available.

Objective Theory of Contract

1. The dispute as to the parties' agreement raises for consideration one of the foundational principles of our law of contract. Because we adhere to the objective theory of contract, it does not matter what a party believes he or she agreed to. The hopes, aspirations, mistakes and misconceptions that a party might have about the meaning or effect of the contract are irrelevant. The negotiations and communications of intention that lead to a written contract merge in the language of the contract chosen by the parties and are subsumed by it.

1. With only limited exceptions, the parties are stuck with the language of the contract which they have signed, whether that language accords with their individual understandings or not: Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] 219 CLR 165 at [42] - [46]. Absent fraud or some other special circumstance, a person cannot escape the consequences of signing a contract simply because he or she did not understand it or did not read it or did not take the trouble to discover its contents. See Wilton v Farnworth (1948) 76 CLR 646 at 649; L'Estrange v F Graucob Ltd [1934] 2 KB 39 at 403; Oceanic Sun Line Special Shipping Co Inc v Fay (1933) 165 CLR 197 at 228.

1. This of course places a heavy responsibility on a party's solicitor. He must strive to ensure that the language of the written contract reflects his client's intention and meets her expectations. That is a particularly relevant factor in this case. The plaintiff is a company whose sole director and shareholder is Carin Clonda. She engaged her brother Victor Clonda as her solicitor. He drafted the first lease and submitted it to his sister for execution. But his conduct in doing so - to which I will return - fell far below the level of competence that would ordinarily have been expected.

Mistake & Legerdemain

1. There is a well recognised exception to the principle that a party who makes a unilateral mistake is bound by what he has signed. Where the mistake is the result of conduct by the other party that is essentially dishonest, the mistaken party may be entitled to have the contract rescinded or rectified. The impugned conduct must however have that necessary quality of legerdemain that justifies the intervention of equity. The conduct requisite to enliven the remedy has been described as "equivalent to fraud" or "involving a degree of sharp practice". In Taylor v Johnson (1983) 151 CLR 422 the majority spoke of a party who "deliberately sets out to ensure that the first party does not become aware of the existence of his mistake" (at 432) or who, knowing of the mistake, "engages deliberately in a course of conduct which is designed to inhibit discovery of it" (at 433). See also Johnston v Arnaboldi [1990] 2 Qd R 138 at 144; Easyfind (NSW) Pty Ltd v Paterson (1987) 11 NSWLR 98 at 104-108; Riverlate Properties Ltd v Paul [1975] Ch 133; A Roberts & Co Ltd v Leicestershire County Council [1961] Ch 555; May v Platt [1900] 1 Ch 616 at 623.

1. Mistakes happen of course. And sometimes an innocent party is the fortunate beneficiary of the other party's mistake. In a commercial negotiation that culminates in a written contract that is proffered by a legally represented party, one is ordinarily entitled to accept the document at face value. In a given case, there could be any number of reasons why the form of contract might contain a provision that is unfavourable to the proffering party. That is especially so where there has been no clear resolution of the issue in the antecedent negotiations. Unless the other party is clearly put on notice that something has gone awry, he is not obliged to be his brother's keeper. The principle that denies efficacy to a signed contract in circumstances such as these only operates where there is a proper basis for impugning the conduct of the party who seeks to take advantage of the other's mistake. That conduct must be blameworthy in the sense that I explained in paragraph [6] above. The point was well made by the English Court of Appeal in Riverlate Properties Ltd v Paul (supra) at 141:

If reference be made to principles of equity, it operates on conscience. If conscience is clear at the time of the transaction, why should equity disrupt the transaction? If a man may be said to have been fortunate in obtaining a property at a bargain price, or on terms that make it a good bargain, because the other party unknown to him has made a miscalculation or other mistake, some high-minded men might consider it appropriate that he should agree to a fresh bargain to cure the miscalculation or mistake, abandoning his good fortune. But if equity were to enforce the views of those high-minded men, we have no doubt that it would run counter to the attitudes of much the greater part of ordinary mankind (not least the world of commerce), and would be venturing upon the field of moral philosophy in which it would soon be in difficulties.

Sequence of Events - First Lease

1. Against that background of legal principle, I set out in what follows my findings of fact on the issue concerning the parties' agreement. Those findings indicate that Carin and Victor Clonda acted with guile and deception in taking advantage of the defendant's mistake and procuring the execution and registration of the second lease. They lead to the conclusion that the second lease should be either set aside or rectified.

1. The starting point is the board meeting of the defendant that took place on 28 November 2008. I have more to say about this meeting, and the evidence concerning it, in paragraphs [48] - [51] below. The purpose of the meeting was to negotiate and finalise the terms of the proposed lease with the plaintiff. Victor Clonda attended on behalf of the plaintiff. Although other matters were agreed, no resolution of the issue of liability for outgoings was reached.

1. On 3 December, following the meeting, Victor Clonda prepared and submitted to Carin Clonda a draft lease. He asked her to review it before he submitted it to the defendant's solicitor, Trevor Butt. Carin Clonda reviewed the draft lease between 3 and 8 December. She did so carefully, noticing a number of matters requiring attention, which she pointed out to her brother. Her review necessarily included the Reference Schedule. Item 13 of the Reference Schedule starkly provided that the lessee was liable for 100% of outgoings. She made no comment about that provision. On 8 December, Carin Clonda sent an email to her brother pointing out the matters that she thought needed attention in the draft lease and raising certain queries. She did not query the provisions relating to the lessee's liability for outgoings. On 9 December, Victor Clonda sent the draft lease to the defendant's solicitor Mr Butt. Article 4 and Item 13 of the Reference Schedule provided for the lessee to pay 100% of the outgoings.

1. On 23 December, after reviewing the draft lease, Mr Butt sent an email to Victor Clonda informing him that the lease appeared to be in order with some minor exceptions. On the same day he also sent an email to Bob Dubois, a director of the defendant, informing him that the lease appeared to be in order in all of its essential terms. He attached to his email both an unmarked draft and a marked up copy of the lease. Between 23 December 2008 and 16 January 2009, Victor Clonda amended the draft lease in accordance with Mr Butt's email sent on 23 December. He made no alteration to Article 4 and Item 13 of the Reference Schedule, which continued to provide for the lessee to meet 100% of outgoings. On 16 January, he sent the draft lease, incorporating the agreed changes, to Mr Butt. He informed Mr Butt that he had "emailed to Carin today for tonight's board meeting. I understand it will be signed then".

1. At the defendant's board meeting on 16 January, Carin Clonda was present. She was not only the sole director of the proposed lessee but she also happened to be the CEO and a member of the board of the defendant, the proposed lessor. It was resolved at the meeting that two nominated board members, Corrie Byrne and Lewis Price, should review the draft lease to ensure that the changes suggested by Mr Butt had been addressed. The minutes then stated that the lease "Should be ready to be signed off at the next Board Meeting". Carin Clonda continued to review the draft lease after the meeting. On 3 February she requested Victor Clonda to add a further Article 25. At the next board meeting on 20 February, Carin Clonda was again present. It was resolved that Carin Clonda and the board "agreed to sign off" and that Carin Clonda, Corrie Byrne and Lewis Price were "to qualify minor points prior to signing".

1. On 23 February, Mr Byrne suggested to all interested parties including Carin Clonda, Victor Clonda, Bob Dubois and Lewis Price that the only discrepancy requiring attention related to the time period in Annexure B. He said he had spoken to Victor Clonda regarding the change. Everyone agreed with Mr Byrne's suggestion. On the following day, 24 February the lease was executed by Lewis Price on behalf of the lessor and Carin Clonda on behalf of the lessee. Mr Byrne witnessed both of their signatures. Those three persons initialled each page of the lease including the pages containing the terms providing for the lessee to meet 100% of the outgoings, namely Article 4 and Item 13 in the Reference Schedule.

1. Victor Clonda then submitted the lease for registration. On 9 March he received a list of requisitions from the Land Titles Office. One of the requisitions required the lease to be duly executed by lessor and lessee in accordance with Section 127 of the Corporations Act. Another related to the production of the certificate of title. Between 30 March and 29 June, Victor Clonda took a number of ineffective steps to obtain registration of the lease. However on 29 June the lease was again rejected. The requisition dated 9 March had still not been satisfied. In particular, the lease had not been duly executed in accordance with Section 127 of the Corporations Act.

1. On 28 July, a board meeting of the defendant took place. Mr Byrne and Lewis Price, the directors who had signed the lease on 24 February, were not present. The board was dissatisfied with the performance of Carin Clonda as CEO. It was resolved that a "Letter of disappointment to be forwarded to CEO for lack of communication with the Board on vital issues". On 30 July, following that meeting, Mr Dubois sent a letter to Carin Clonda setting out numerous complaints and requests including that "You are to provide the Lease Documents for sighting by all Board Members as soon as possible".

1. This must have spurred Carin and Victor Clonda into action. Between 4 and 17 August, Victor Clonda arranged for the lease to be re-executed by the defendant purportedly in accordance with Section 127 of the Corporations Act. The two persons who signed on behalf of the defendant were once again Mr Byrne and Mr Price. At some point before 21 August, Carin Clonda also re-executed the lease on behalf of the plaintiff. Her signature was witnessed by Mr Byrne and a Mr Thomas. Once again her initials appear on each page, including on those pages containing the provisions that required the lessee to meet 100% of the outgoings, namely Article 4 and Item 13 of the Reference Schedule.

1. On 21 August, Victor Clonda again submitted the lease for registration. It had now been re-executed, albeit imperfectly, on behalf of the plaintiff and the defendant. By this stage, Carin Clonda, advised by her solicitor brother, had twice reviewed and twice executed (in February and August) a form of lease that provided for the lessee to meet 100% of outgoings. The re-executed lease was however again rejected. On 2 September, Victor Clonda informed Mr Butt that the Land Titles Office required the lease to be signed by the secretary of the defendant. He asked Mr Butt who the secretary was.

The Second Lease

1. What then followed does not reflect well on Carin and Victor Clonda. The rejection of the lease on 2 September, and the requirement for further execution, seems to have provided the opportunity for Victor Clonda to re-draft the lease in a material way. He changed Article 4 and Item 13 in the Reference Schedule so that those provisions of the lease now imposed the liability for outgoings on the lessor, rather than on the lessee. The affidavits of Carin and Victor Clonda failed to address fully, fairly or indeed honestly, the circumstances in which these changes came into existence. Under cross-examination, each of them was defensive, unpersuasive and lacking in credibility, particularly on this issue. What is more, in ways that I will later explain, both Carin and Victor Clonda took steps to minimise the likelihood that the defendant would appreciate the changes that were made.

1. The alteration of the lease did not occur immediately. There seems to have been a two step process. Victor Clonda accepted that after 2 September, he must have arranged for his sister to add her signature to the lease in the capacity of secretary of the defendant. He wrote the word "Secretary" alongside her signature. He did this on the form of lease that had been irregularly re-executed between 4 and 17 August by Mr Byrne and Mr Price on behalf of the defendant. Like all of its predecessors it provided for the lessee to meet 100% of outgoings. For her part, Carin Clonda said that she could not recall why or when she re-signed the form of lease that had been originally executed on 24 February.

1. The evidence concerning the second step is opaque but sufficient to enable me to deduce what happened having regard to the balance of probabilities. After his sister had added her signature to the lease in the capacity of secretary of the defendant, Victor Clonda re-drafted the lease - even though it had been executed and re-executed on multiple occasions in the same form. He took it upon himself to re-write Article 4 and to alter Item 13 of the Reference Schedule. The effect was to reverse the liability for outgoings. He said he did so to reflect the agreement that took place on 28 November 2008. In fact, there was no such agreement, at least in relation to outgoings. I will return later to the evidence on that issue. When asked why he made the changes to the form of the lease that had been in existence since December 2008, Victor Clonda was unconvincing. His evidence in part was as follows:

QDid Mr Dubois speak to you about the terms of that agreement?

AI don't recall, your Honour.

QWho told you that the version of the lease which you had previously created on several occasions was incorrect?

AI think from memory my sister told me it was incorrect.

QDid you ever have a discussion with Mr Dubois or Mr Butt to the effect that the previous versions of the lease were incorrect?

AI think from memory I did have a discussion with Mr Dubois to say that it didn't reflect the agreement.

QI don't think I have noticed that in your two affidavits?

ANo, it is not in my two affidavits.

1. It will be recalled that on 30 July Mr Dubois wrote to Carin Clonda asking her to provide the lease so that it could be sighted by all board members. By early September she had not done so. There was no good reason for her failure to do so. The lease may not yet have been put into registrable form but it had been twice executed (in February and August) on behalf of the plaintiff and defendant. It represented the parties' agreement. It could not have sensibly mattered to Carin Clonda that the two directors who had signed on behalf of the defendant had since resigned. She did not suggest that she believed their execution to have been unlawful or unauthorised at the time that their signatures were added to the lease.

1. Thus, notwithstanding the necessity to satisfy the formalities of due execution, there was no reason not to provide the lease to Mr Dubois to enable the board to sight it. The only reason that explains why Carin Clonda did not do so is that she must have appreciated, or perhaps decided, that the terms of Article 4 and Item 13 of the Reference Schedule were not in the plaintiff's commercial interests. The most charitable explanation is that she had convinced herself that the defendant had agreed to accept liability for the outgoings and that, despite her own careful review and the bumbling incompetence of her brother, she only recognised in early September that the form of lease that had been several times executed had the opposite effect.

1. However, none of that justified or excused the failure by Carin and Victor Clonda to act honestly, openly and frankly in their dealings with the defendant during the following weeks. Carin Clonda must have instructed Victor after 2 September to re-draft Article 4 of the lease and Item 13 in the Reference Schedule. Victor duly created a new form of lease. Carin Clonda's evidence then descended into fabrication. She said that Mr Dubois approached her and told her that he wanted to have the lease signed again because of the resignation of Mr Byrne and Mr Price. This was not rational and it was denied by Mr Dubois. It was not even consistent with the line taken in cross-examination of Mr Dubois by the plaintiff's very able counsel. He put to Mr Dubois that Carin Clonda gave him the lease in September in response to his as yet unanswered request of 30 July. I prefer Mr Dubois' account of what happened.

1. In fact Carin Clonda approached Mr Dubois on the evening of 12 September. She had with her the re-drafted lease prepared by Victor. There had been no prior communication with anyone on behalf of the defendant about the changes that Victor had effected to the lease. She said to Mr Dubois words to the effect "I really want to get the lease finalised. Can we sign it tonight so that I can then get it finalised?" This was disingenuous and misleading. She did not say that the form of lease that she now wished to have "finalised" was materially different to that which had been in existence since December 2008. She did not say that there had been a mistake. She kept quiet. And Mr Dubois had no reason to suspect that anything was amiss.

1. However Mr Dubois was astute enough to say that he was prepared to sign the lease that Carin Clonda proffered to him on the basis that he would then take it away and check it against the final approved version that had been received from Mr Butt many months ago. In effect he was signing the lease in escrow, subject to satisfying himself that it conformed to the version approved by Mr Butt. On the following day, 13 September, when Mr Dubois reviewed the lease, he noticed what he thought were mere typographical errors. He did not perceive the wholesale re-writing of Article 4 but he did notice an apparent inconsistency in the numbering of its provisions. He also noticed what he thought was an innocent slip in Item 13 of the Reference Schedule. He suspected nothing sinister but thought that the amount "100%" had dropped off and should be reinstated for greater clarification. He sent an email to Victor and Carin to this effect, adding that these "small changes", which he described as "typos", could be in handwriting and be initialled by Carin and himself.

1. Mr Dubois also telephoned Carin Clonda and told her of the "typos" that he had picked up. She said to him, knowing full well that they were not typographical errors but deliberate changes that she had instructed Victor to make, "It must have gotten lost in all the different versions". Mr Dubois then says that he and Carin agreed to meet to make and initial the changes that he requested at the extraordinary general meeting of NSW Squash to be held on 23 September. Mr Dubois believed that he needed to re-sign the lease and initial the changes. He says that this occurred and that Victor Clonda was also present. According to Mr Dubois, Victor Clonda then took the form of lease with the handwritten changes that had been initialled and said "I will send this over to Trevor Butt and he will register the lease".

1. No such form of lease with handwritten initialled changes to Article 4 and Item 13 in the Reference Schedule was ever seen again. None was produced. No such document was forwarded to Mr Butt. It appears to have vanished. In their affidavits in chief, Victor and Carin Clonda completely avoided the topic of how and when the altered lease was executed or what they did, or did not do, in response to Mr Dubois' requests by email and telephone to correct what he thought were "typos".

1. In reply, Victor Clonda simply denied the meeting, the conversation, the execution and the initialling that Mr Dubois said had taken place on 23 September. Similarly, Carin Clonda denied that she had a conversation on 12 September with Mr Dubois about his conditional execution of the lease. And she denied any conversation about changes to the lease or that she made any such changes, either on 23 September or at any other time. She did not explain the execution. And there was never a reply to Mr Dubois' email of 13 September.

1. The evidence of Victor and Carin Clonda was implausible. And their unwillingness to give a full and frank account of what they did following Mr Dubois' email on 13 September is troubling. All that is clear is that a form of the lease, containing the material changes that had been drafted by Victor, but without the corrections requested by Mr Dubois, was submitted by Victor Clonda for registration on or shortly after 23 September. This must have been the document executed by Mr Dubois on 12 September subject to checking. It was undated. Predictably, it was again rejected for reasons that are a testament to Victor Clonda's incompetence but are irrelevant to the determination of the issues in dispute.

1. Registration finally occurred on or about 29 October. Neither Victor nor Carin Clonda provided a copy of this lease to anyone on behalf of the defendant until after it was eventually registered. Carin and Victor Clonda must have thought by then that the reversal of the liability for outgoings was a fait accompli. They were wrong. On 10 November Victor Clonda sent a copy of the registered lease to Mr Butt "for your records". He had every reason to think that Mr Butt would simply file it away. Victor Clonda must have known that Mr Butt would have no incentive, nor any need - absent notice of irregularity - to review and check the registered lease against previous versions. Ordinarily there would be no point in doing so when presented with a registered lease. The time for comparison of drafts had passed. One can imagine that Mr Butt's reaction must have been one of relief that the tortuous process was finally over.

1. In the meantime, Mr Dubois was left in the dark. He had not been given a copy of the lease - neither the one he signed on 12 September subject to checking against the final draft received from Mr Butt, nor the one with handwritten changes to Article 4 and Item 13 in the Reference Schedule which he said he signed and initialled on 23 September. The latter disappeared and the former was registered.

1. On this issue, Victor Clonda gave evidence that verged on the absurd. He said that he did not send the lease to Mr Dubois but sent it to his sister. He said that his understanding was that his sister forwarded the lease to Mr Dubois for review and execution. He agreed that it would have been important to draw to the attention of Mr Butt or Mr Dubois that he had re-drafted Article 4 and Item 13. He endeavoured to explain his failure to draw the changes to Mr Butt's attention by saying that "Mr Butt took a very limited role in this whole process". This was not true in any relevant sense. Mr Butt and Victor Clonda communicated directly in relation to the drafting of the first lease - as you would expect. Victor Clonda knew that Mr Butt's role, limited or not, was to ensure that the terms of the lease were in accordance with the defendant's instructions. Notwithstanding this knowledge, he deliberately avoided Mr Butt until after he had procured the registration of the lease.

1. Paradoxically, but perhaps understandably, Victor Clonda also avoided Mr Dubois. Even after registration, he was unwilling to provide a copy of the lease to Mr Dubois. Mr Dubois had been asking for a copy since 30 July. Victor Clonda knew that the question of liability for outgoings was important to Mr Dubois. He knew that Mr Dubois would undoubtedly check Article 4 and Item 13 - the two provisions that had been the subject of his 13 September email. Having stated that he did not draw Mr Butt's attention to the changes because of his "limited role", he attempted to justify his failure to provide a copy of the registered lease to Mr Dubois on the meretricious ground that "I did not believe it was appropriate for me to provide the document [to Mr Dubois] given the defendant was legally represented by [Mr Butt]"! There was force in the cross-examiner's retort that Victor Clonda was just making up his evidence.

1. Even on 25 November, when Mr Dubois sent an email to Victor Clonda complaining about a number of matters, including the fact that he had "not sighted the formal lease approved by the Land Council (sic)", Victor Clonda avoided him. His glib reply, designed to defer and delay the defendant's knowledge of the true situation was as follows:

I don't wish to debate this matter further. The registered lease was forwarded to Trevor Butt some 2 weeks ago.

Duplicitous Conduct

1. In my view, Victor and Carin Clonda knowingly deceived Mr Dubois. Like Brer Rabbit, they were "lying low and saying nothing": Riverlate Properties Ltd v Paul (supra) at 138D. Their conduct was not merely sharp, it was dishonest. Mr Dubois was mistaken when he signed the lease, subject to checking, on 12 September. On that occasion, he had every right to assume that, like all of the predecessor versions of the lease from December 2008, it provided for the lessee to meet 100% of outgoings. When he did check the lease, he noticed what he thought were typographical errors. He did not know that they were deliberate changes of a material nature that Carin Clonda had instructed her brother to make. When Mr Dubois pointed out the need for changes to correct the errors, he was led a merry dance.

1. Victor and Carin Clonda knew that to proceed with registration of a version of the lease which Mr Dubois had told them (by email and telephone) was wrong in a material respect, was duplicitous. From late September onwards, they deliberately set out to ensure that Mr Dubois did not become aware that the lease had gone forward in the form altered by Victor Clonda, without the changes which Mr Dubois requested, and which he said he had initialled.

1. In those circumstances, the defendant is entitled to rectification of the registered lease. The result of rectification will be that the plaintiff was at all times liable for the payment of Council rates and outgoings. That is the natural construction of Article 4 and Item 13 in the first lease and of the same provisions, when rectified, in the second lease. The plaintiff has not paid the amounts due for outgoings. Subject to a remaining argument concerning the notice under Section 129 of the Conveyancing Act, to which I will come later, the defendant has therefore established the monetary breach on which it relied for re-entry to the premises.

1. The defendant also relied on two non-monetary breaches. Their resolution does not depend on which lease is found to govern the parties' legal relationship. I will set out my findings in relation to them in what follows.

Provision of Office Space

1. The provision by the plaintiff of office space in the leased premises, available for use by the defendant, was an important matter to the defendant. Unfortunately, Carin Clonda did not treat the plaintiff's obligation to provide office space to the defendant with the seriousness which it deserved. She behaved in a derisory manner, endeavouring to confine the defendant to a small storage room in the car park. The storage room is approximately 2 metres square. It is windowless and wholly lacking in the size and amenity which the defendant was reasonably entitled to expect. Carin Clonda's actions on behalf of the plaintiff were provocative and possibly also embittered. I have concluded that they were in breach of the lease. The relevant provision is Article 24. It should be read with Article 25:

ARTICLE 24 - OFFICE HOURS NSW SQUASH LIMITED

24.01The Lessee agrees to allow the Lessor to occupy an area of the premises, the area which is at the discretion of the Lessee, to allow the Lessor and enable it to conduct the day to day business of New South Wales Squash Limited. Such business is to be conducted during the hours of 10am and 5pm Monday to Friday only.

ARTICLE 25 - OFFICE OF NSW SQUASH LIMITED

25.01The office of New South Wales Squash Limited located at Thornleigh Squash and Fitness Centre is currently valued at $30,760.40 plus (GST) increasing thereafter on each anniversary date by CPI index.

1. The purpose and object of the plaintiff's obligation to provide office space was to enable the defendant "to conduct the day to day business of New South Wales Squash Limited ... during the hours of 10am and 5pm Monday to Friday only". The defendant's business is not insubstantial. As a matter of construction or implication, the plaintiff's obligation necessarily involved the provision of reasonable facilities for the conduct of the defendant's business by the staff and volunteers who could be expected provide their services to it. It required space to be made available that would permit the defendant to comply with its health and safety obligations pursuant to Sections 7 and 19 of the Work Health & Safety Act 2011 and Regulations 40 and 41 made under the Act. And it required reasonableness and good faith in the exercise by the plaintiff of its discretion to select the area of the premises that it would make available.

1. Some indication of the objective intention of the parties is evident from Article 25. It serves no apparent purpose other than to indicate that the parties attributed a substantial value ($30,760) to the space that the plaintiff was obliged to provide to the defendant. That statement of current value sits uneasily with the tiny, cramped and physically isolated storage room in the car park to which, from April 2010, Carin Clonda sought to confine the defendant in the conduct of its business. Mr Dubois was justified in his incredulous exclamation to Carin Clonda that "This is a joke". It was not a joke but it was a clear breach of the plaintiff's contractual obligations under the lease.

Builders' Access

1. The plaintiff's position in relation to the provision of access for the defendant's builders is, if possible, even less meritorious. The relevant provision of the lease is Article 10.01 which provided as follows:

ARTICLE 10 - RESERVATIONS

10.01RIGHT OF ENTRY: The Lessee shall at all reasonable times upon receiving reasonable notice permit the Lessor to enter upon the Demised Premises for any of the following purposes:

10.01.1Effecting any alterations, remodelling or repairs which may be incumbent upon the Lessor by law or which may be reasonably required for ensuring the safety and preservation of the Demised Premises or any other part of the Building; or

10.01.2Effecting, laying or installing in or under, beside or over the Demised Premises any poles, masts, posts, drains, conduits, pipes, mains, cables, electric or other wires or fixtures which may from time to time be required for any existing or future services to the Building or any part thereof, or

10.01.3Inspecting, removing, installing, maintaining, repairing, altering or adding to any water, gas, electrical, telephone, plumbing, air-conditioning equipment, sprinkler system or other services to the Building or any part thereof.

PROVIDED ALWAYS that except in any emergency, when its right of entry may be exercised at any time the Lessor shall carry out such works in such a manner as to minimise so far as may be practicable any inconvenience or interruption to the business of the Lessee.

1. The evidence was replete with instances of the plaintiff's unreasonable behaviour. Carin Clonda sought to justify her lack of co-operation partly on the ground that the operating hours for the squash courts commenced at 2pm on most days and 4pm on Fridays. Thus, despite reasonable notice, she refused to give access in the morning unless the plaintiff was remunerated for the cost of a staff member attending the premises. On other occasions, she made her co-operation conditional upon agreement being reached on business interruption compensation. On another occasion when timber was delivered after reasonable notice had been given, she refused access and the defendant incurred extra charges because the contractors had to wait around for several hours.

1. I am quite satisfied that Carin Clonda's repeated stance on the issue of access for the defendant's builders was wholly inconsistent with the sensible co-operation and reasonableness that were essential to the operation of the regime contemplated by Article 10. By her behaviour, she caused the plaintiff to act in breach of its obligations.

Credit Issues

1. I have said enough to make clear that I have formed an adverse view of the credibility of Carin and Victor Clonda. Whenever there was a difference between their evidence and the evidence of any of the past or present members of the staff of the defendant, or of the defendant's directors Mr Dubois and Mr Lind, I have preferred the latter. I do not think that I can rationally or responsibly give any weight to the evidence of Carin and Victor Clonda except in those instances where it is corroborated by contemporaneous documents or it is non-contentious. I formed the view that in their affidavits and during the evidence they gave in cross-examination, neither Carin nor Victor Clonda was frank. They held back information that they perceived might be harmful; they sometimes resorted to half-truths; and at other times they made assertions that I have reluctantly concluded were obviously false. I concede that it is possible that, with the passage of time, each of them had convinced himself or herself of the correctness of the explanations that they adhered to. But I doubt it.

1. The evidence of Carin and Victor Clonda was not merely unsatisfactory and implausible on essential points having regard to the known objective facts and the probabilities, but it was exacerbated in ways that are difficult to capture in the transcript. Neither exhibited that air of honest straight-forwardness and confidence in the truth of their position that a court hopes to see in a witness. Even allowing for the stress of being in a court room, Carin Clonda constantly appeared worried, nervous and troubled. When confronted with a question which was capable of a simple answer, she sometimes paused agonisingly. Frequently, she diverted her own attention away from the particular statement on the particular document to which the cross-examiner directed her. Regularly, her answers were indirect and non-responsive. It is not possible to enumerate all of the features of her evidence that have led to my assessment: Thomas v SMP International (No 4) [2010] NSWSC 984 at [7]. But I formed the view that she tried to shape her evidence to suit the case.

1. Victor Clonda on the other hand had a lot to answer for and he knew it. He sought refuge in missing documents, incomplete files, administrative disarray and faulty recollection. The true explanation was more damning. In my view he well knew that his behaviour in relation to the alterations to the lease in September 2009 was inexcusable. As a solicitor, whether competent or not, he could not have failed to recognise that his conduct was irregular and likely to mislead the defendant. I have explained the circumstances that lead to that conclusion in paragraphs [18] to [34]. That may explain, but does not justify, his failure to address the events of September 2009 in his affidavits. He was, I think, seeking to hold back information. Nor was he forthcoming in the evidence he gave in cross-examination. Indeed he compounded the problem by giving answers that were sometimes contradictory and often incredible.

1. Corrie Byrne is in a different category. I found his evidence to be unsatisfactory for different reasons. He behaved like an advocate and exhibited an unseemly desire to assist Carin Clonda. He was combative, rigid and convinced of his own rectitude, even though he had only, in the last fortnight, been asked to consider the matter on which he gave evidence. The point of his evidence related to his minutes of the meeting of the board of the defendant on 28 November 2008. Their significance was something that he had not considered for three and a half years.

1. Corrie Byrne's minutes of that meeting followed a logical and rational sequence. They have the hallmark of someone who had carefully followed the proceedings and faithfully and fully recorded what had transpired. The structure of the minutes made sense. The first part recorded "Terms that need to be agreed/negotiated". There then followed a list that comprised annual lease payments, additional charges and reviews, the lease term and outgoings. Alongside each item for "agreement/negotiation" was some notation that indicated the options or the possible outcome. Thus alongside the first item, there appeared "(current agreement $52,000 + GST)". Alongside the lease term item there appeared the notation "(3 + 3 or 5 + 5)". Under the heading "Outgoings" there appeared "Water", "Electricity", "Waste Disposal" and "Council Rates". Alongside each of these items there appeared in brackets the words "Lessor" or "Lessee" coinciding with whatever the current responsibility was under the informal lease that had subsisted since 2007.

1. Mr Byrne insisted that the words in brackets signified that agreement had been reached at the meeting on the respective liability of the lessor or the lessee, as the case may be, for each of the items of outgoings that appeared in his minutes. This however was not consistent with the balance of the document. The second part of the minutes recorded the matters on which agreement was reached. There were two sections to this part. The first section commenced "Board discussed each item and agreed to the following". The second section commenced: "VC/CC accepted in principle the following terms". In both cases, what followed was a list of terms that did not include the outgoings or the liability of one party or the other for any one of the outgoings.

1. Not only was Mr Byrne seeking to contradict what appeared to be the natural construction of his own carefully structured document but he was unwilling to acknowledge the validity of the competing point of view. His vehemence in the face of apparent contradiction, and his inability to put forward a satisfactory explanation, did not assist his plausibility. What is more, his minutes noted that Victor Clonda was to draft the contract for review by Mr Butt. When Victor Clonda did so, he did not draft the lease in a manner that was consistent with the significance that Mr Byrne attached to the brackets in his minutes. Finally of course, Mr Byrne was contradicted by Mr Dubois who said that the topic of outgoings was not reached and was not discussed at the meeting. On all important issues I found that Mr Dubois' evidence accorded with the likely probabilities and the contemporaneous documents.

Section 129 Notices

1. Section 129(1) of the Conveyancing Act states that a right of re-entry or forfeiture shall not be enforceable unless and until the lessor serves on the lessee a notice specifying the particular breach complained of and requiring the lessee to remedy the breach. The notice is not a piece of "sacramental ritual". Substantial compliance is sufficient. The object of the notice is to bring to the lessee's attention the matters which are complained of and to provide it with the opportunity of remedying the breach: Ex parte Dally-Watkins; Re Wilson (1955) 72 WN (NSW) 454, 456 (Street CJ); Macquarie International Health Clinic v Sydney South West Area Health [2010] NSWCA 268 at [308]-[309] (Handley JA). Express reference to Section 129 itself it not required.

1. Among other things, the plaintiff says that if the second lease is rectified, the Section 129 notice relating to non-payment of outgoings, on which the defendant depends for its right of re-entry in relation to that breach, is invalid because it was based on the wrong lease. I do not accept that submission. The notice recites the "Lease commencing 1 January 2009" in respect of the premises. It gives notice that "Clauses 4.01 and 4.02 of the Lease state that you shall reimburse the Lessor the outgoings referred to in Clause 4.01". It states that the plaintiff is in default of its obligations to reimburse the defendant for those outgoings. In my view, the notice satisfies the requirements of Section 129, including Section 129(9). Significantly, the notice need only be in a form "to a similar effect" to that set out in the Sixth Schedule of the Act.

1. The plaintiff was clearly put on notice of the particular breach complained of and was given the opportunity to remedy the default. The effect of clauses 4.01 and 4.02 of the registered lease when rectified, and for that matter of Clauses 4.01 and 4.02 of the first lease, is to oblige the plaintiff to reimburse the defendant for all outgoings. The notice is not pinned to one lease or the other and falls squarely within the terms of either lease. The plaintiff was placed in a "completely informed position so as to enable it to elect what shall be [its] subsequent conduct": Johnson v Senes [1961] NSWR 566, 569 (Wallace J).

1. Further, I see no difficulty with the time for compliance in all three Section 129 notices. The period of 14 days for remedying the breaches that was stipulated in each notice was reasonable as a matter of fact. This is especially so in relation to the notices concerning the breaches of Articles 10 and 24 in the light of the nature of the obligations, the ease with which compliance with those obligations was capable of being achieved if the plaintiff was prepared to behave reasonably and the history of the events that preceded the issue of the notices on 5 March 2012. In the circumstances that had occurred and given the plaintiff's wilful refusal to comply with reasonable requests, it was not necessary for the defendant to allow 28 days for compliance. It was obvious that the plaintiff would not remedy its breaches, and would not comply with its obligations, unless and until there were an order of the court requiring it to do so. At a practical and commonsense level, nothing would have been achieved - except further prejudice to the defendant - if 28 days were allowed. The plaintiff's position was so entrenched that it would not have voluntarily remedied the breaches whether the time for doing so was 14 days or 28 days.

1. The same reasoning explains why a 14-day period was reasonable in relation to the breach of the obligation to pay outgoings. The plaintiff would never have paid the amount due unless and until a court ordered it to do so. It was never voluntarily going to avail itself of the opportunity to remedy that breach. The defendant knew that. Further, even if it were the only default relied upon, I would have been reluctant to grant relief against forfeiture for the failure to pay the outgoings, given my findings of dishonesty. In the particular context of this case, the notice period was reasonable. In any event, the plaintiff put no evidence before me of its financial capacity to pay the outstanding outgoings. The time for doing so is at the hearing, not after judgment has been given. I say more about relief against forfeiture in what follows.

Relief Against Forfeiture

1. I have reached the view that this is not a case where relief against forfeiture is appropriate. The discretion to grant or refuse relief against forfeiture is broad. It requires consideration of the "conduct of the parties" and "all the other circumstances": Section 129(2). There are sometimes differences in approach whether one is considering the forfeiture of a lease or an option to renew or whether what is in issue is a monetary default or a non-monetary default. I have set out below the authorities relating to each of those categories:

(a)Relief against forfeiture of a lease for monetary default: Hace Corp Pty Ltd v F Hannan (Properties) Pty Ltd (1995) 7 BPR 14,326; Hayes v Gunbola Pty Ltd (1986) 4 BPR 9247; Stieper v Deviot Pty Ltd (1977) 2 BPR 9602.

(b)Relief against forfeiture of a lease for non-monetary default: Shiloh Spinners Ltd v Harding [1973] AC 691, 725-726; Hyman v Rose [1912] AC 623, 631; Pioneer Gravels (Qld) Pty Ltd v T & T Mining Corp Pty Ltd [1975] Qd R 151; Byron Bay Retirement Villages Pty Ltd v Zandata Pty Ltd [2008] NSWSC 1123; Cherry Lane Fashion Group Ltd v Jam Factory Pty Ltd [1990] ANZ ConvR 120; Ladies Sanctuary Pty Ltd v Parramatta Property Investment Ltd (1997) 7 BPR 15,156; Sparta Nominees Pty Ltd v Orchard Holdings Pty Ltd [2002] WASC 54 at [253].

(c)Relief against forfeiture of an option to renew for monetary default: Stellar Mining NL v Evanel Pty Ltd (1983) NSW ConvR 55-118 at 56,868; Ell v Cisera (2000) 10 BPR 18,045; Capital Projects (Qld) Pty Ltd v Trust Co of Australia [2008] QSC 105; Total Destination Marketing Pty Ltd v Horizons Snowy Mountains Pty Ltd [2011] NSWSC 1575.

(d)Relief against forfeiture of an option to renew for non-monetary default: Best & Less (Leasing) Pty Ltd v Darin Nominees Pty Ltd (1994) 6 BPR 13,783; R & J Lyons Family Settlement Pty Ltd v 155 Macquarie Street Pty Ltd [2008] NSWSC 310 at [153].

1. However the circumstances of this case, and in particular the conduct and attitude of Carin Clonda on behalf of the plaintiff, remove the necessity for the consideration of these distinctions. On any view, it would not be in the interests of justice to exercise my discretion in favour of the plaintiff. This is no ordinary commercial lease. The lessor and lessee are bound under this lease to co-operate with each other to an extent that is not always usual. Annexure B to the lease lists many aspects of the premises that require rectification and repair. The defendant is required to carry out the works over the 5 year period of the lease. Those works must be undertaken to the satisfaction of the plaintiff. The parties cannot therefore avoid each other. They are bound to remain in a proximate relationship during the term of the lease.

1. I will not detail all of the unsavoury evidence that reflects the wholesale breakdown in the relationship or the wilful and obdurate conduct on behalf of the plaintiff. The relationship is poisonous, acrimonious and unsalvageable. At the hearing, Carin Clonda even instructed her counsel to attempt to introduce evidence of her sexuality and certain discrimination to which she said she was subjected. The parties are engaged in litigation on other fronts, not just in these proceedings. The plaintiff's breaches were deliberate and recalcitrant. The monetary breach was the ultimate result of the insistence by Carin Clonda on a form of the lease that was procured by conduct that I have characterised as dishonest. The non-monetary defaults were the result of wholly unreasonable behaviour. There is no hope for the continuation of a stable commercial relationship. Carin Clonda said herself that the relationship between the plaintiff and the defendant was untenable. Some evidence suggested that she wanted to send the defendant "broke". She refuses to deal with anyone on behalf of the defendant other than through a psychologist whom she has appointed as her representative. This is an extreme case. If I grant relief against forfeiture, there will only be more disputation. And there will likely be more litigation.

Conclusion & Orders

1. In the result, the defendant, which commenced the hearing by seeking my disqualification, has ended the hearing by succeeding on all issues. I dismiss the summons. I declare that the exercise by the defendant of its right of re-entry in respect of the demised premises was valid. To the extent necessary, I declare that the defendant is entitled to have registered lease AF85552C rectified in the manner set out in paragraph 4 of the Cross Summons. I order the plaintiff to pay the defendant's costs.

Decision last updated: 25 May 2012