Darzi Group Pty Ltd v Nolde Pty Ltd - [2021] NSWSC 774

Supreme Court

New South Wales

Medium Neutral Citation: Darzi Group Pty Ltd v Nolde Pty Ltd [2021] NSWSC 774
Hearing dates: 8 to 14 April 2021
Decision date: 28 June 2021
Jurisdiction: Equity - Real Property List
Before: Robb J
Decision:
See pars [139], [142], [211], [234], [239], [242], [247], [252], [262], [266], [285], [291]-[295]. The parties should confer and forward to my Associate draft short minutes of order to give effect to these reasons as required by [295].

Catchwords:
LEASES AND TENANCIES — Renewals and options — Exercise of option — Where lessee commenced original proceedings seeking declaration that the parties had entered into a retail lease — Where Court of Appeal held the parties had entered into a retail lease — Where lessee now seeks specific performance of lessor’s agreement to renew the lease pursuant to lessee’s exercise of option — Where lessor pleads that the Court should use its discretion to withhold specific performance on account of the inability of the parties to cooperate, the toxic interpersonal relationship between the principals of the lessor and lessee, and because damages would be an adequate remedy — Where the Court found that a breakdown in personal relations between principals of parties to the lease is not a proper basis for the Court to deny the lessee its proprietary right to a renewal of the lease — Where the Court found that damages are not an adequate remedy — Where the Court grants specific performance of lessor’s agreement to grant a renewed lease to lessee
LEASES AND TENANCIES — Retail leases — Retail shop lease — Lessee in breach of obligations — Where lessor claimed lessee failed to pay rent in circumstances where lessee paid less than the rent due under the lease on its interpretation of the operation of the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW) — Where COVID-19 regulatory regime required rent to be renegotiated in good faith by lessor and lessee — Where lessor failed to renegotiate in good faith — Where the Court found that the lessor will never be entitled to take a prescribed action against lessee in respect of the short payments in rent
LEASES AND TENANCIES — Retail leases — Retail shop lease — Lessee in breach of obligations — Where lessor claimed lessee failed to pay insurance premiums in relation to outgoings pursuant to the lease — Where lessor and lessee disputed the meaning of ‘insurance’ — Where lessor claimed lessee must pay a share of product and public liability insurance — Where lessee held its own insurance in that regard — Where the Court held that the lessee did not breach the lease by failing to pay the share of premiums claimed by the lessor
LEASES AND TENANCIES — Retail leases — Retail shop lease — Lessee in breach of obligations — Where lessor claimed lessee failed to maintain the premises in good condition — Where lessor sought order requiring lessee to perform a list of maintenance tasks…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2021] NSWSC 774
Decision Date: 28 June 2021

CaseChat Overview and Summary

Darzi Group Pty Ltd, the lessee, sought specific performance of an option to renew a retail lease from Nolde Pty Ltd, the lessor. The matter was heard in the Supreme Court of New South Wales. The Court of Appeal had previously found that the parties had entered into a retail lease. The dispute now centered on the lessor's refusal to renew the lease after the lessee exercised an option to do so. The lessor argued that specific performance should be denied due to the breakdown in personal relations between the principals of the parties, the inability of the parties to cooperate, and the availability of damages as an adequate remedy.

The court held that a breakdown in personal relations between the principals of the parties to a lease is not a valid reason for denying the lessee its proprietary right to a lease renewal. The court also found that damages were not an adequate remedy in this context, as the specific performance of the renewal agreement was necessary to protect the lessee's proprietary rights. The court granted specific performance of the lessor's agreement to grant a renewed lease to the lessee. Additionally, the court found that the lessor was not entitled to take action against the lessee for short payments in rent due to the lessor's failure to renegotiate in good faith under the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW). The court also held that the lessee did not breach the lease by failing to pay a share of product and public liability insurance premiums claimed by the lessor, as the lessee held its own insurance in that regard.

The court made an order that would facilitate making an order in relation to the cleaning, repair, and maintenance of the premises, as it was unclear on the evidence whether the rectification of the alleged breaches were the responsibility of the lessor or lessee under the lease. The court refused to make the orders sought by the lessor regarding the lessee's failure to provide access to the premises for inspection, as there was no evidence that the lessor sought to access the premises for that purpose. Finally, the court found that the lessor could not claim damages for trespass on parts of the property outside the leased premises, as the lessor had not proved that it suffered any loss or established that it had title to bring a claim in trespass against the lessee.

Orders