Denham Bros Limited v W Freestone Leasing Pty Ltd

Denham Bros Limited took legal action against W Freestone Leasing Pty Ltd in a dispute concerning the assignment of a reversion in a lease agreement. The matter was heard in the Supreme Court of Queensland. The crux of the dispute was whether the assignment of the reversion effectively transferred the benefit of a covenant allowing the lessor to require the lessee to purchase the demised land, and if this could be enforced despite the lessee's contention that such a transfer constituted an assignment of a burden.

The court was required to determine whether the assignment of the reversion included the benefit of the covenant that permitted the lessor to compel the lessee to purchase the property if the lease was not renewed. Furthermore, the court needed to establish if the terms of an agreement for lease could be considered in interpreting a covenant within the lease itself. The court found that the lease was not ambiguous and that it was inappropriate to refer to the terms of the agreement for lease in interpreting the lease.

The court ruled that the assignment of the reversion did indeed transfer the benefit of the covenant, and this transfer did not impose a burden on the lessee. The court held that the covenant was an existing right that could be assigned as a legal chose in action under the Property Law Act 1974 (Q), section 199. Consequently, the court dismissed the originating application and declared that W Freestone Leasing Pty Ltd was entitled to exercise the option contained in clause 33 of the registered lease and that it had validly done so by notice in writing dated 26 July 2002.