Drama Unit Pty Ltd v Fearndale Holdings Pty Ltd (Administrator Appointed)

Drama Unit Pty Ltd (the landlord) appealed to the Court of Appeal of New South Wales against a decision concerning the termination of a lease with Fearndale Holdings Pty Ltd (the tenant). The dispute centred on whether the landlord had validly terminated the lease and, consequently, whether the tenant remained liable for rent after the purported termination.

The primary legal issues before the Court of Appeal were whether the landlord's actions constituted an eviction that suspended the tenant's obligation to pay rent, and whether the lease contract displaced the common law rule regarding the suspension of rent during eviction. The court also considered whether the landlord had validly terminated the lease for breaches of specific covenants, particularly concerning the tenant's obligations to obtain and maintain consents for a mining business, and whether the notices of termination complied with section 129 of the *Conveyancing Act 1919* (NSW).

The Court of Appeal reasoned that while the landlord's actions might have amounted to a partial eviction, this did not automatically suspend the tenant's obligation to pay rent, as the lease contract contained express provisions to the contrary. The court found that the lease did not displace the common law rule that a landlord's breach of covenant, such as a substantial interference with the tenant's possession, could suspend the obligation to pay rent. However, the court determined that the landlord had validly terminated the lease for specific breaches of clause 7.3(4)(b) of the lease, relating to the tenant's failure to obtain necessary consents for its mining operations.

The appeal was allowed in part. The court varied the declaration made by the primary judge to confirm the valid termination of the lease by the landlord on 22 March 2019 for breaches of clause 7.3(4)(b). The judgment for rent awarded to the landlord was set aside, and the appellant was ordered to pay 30% of the respondents' costs of the appeal.