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

Case •

[2018] NSWSC 1895

•

10 December 2018

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Drama Unit Pty Ltd v Fearndale Holdings Pty Ltd (Administrator Appointed) & Anor [2018] NSWSC 1895
Hearing dates: 29 – 30 November 2018
Decision date: 10 December 2018
Jurisdiction:Equity - Corporations List
Before: Black J
Decision:

Termination of the lease by the First Defendant is ineffective on the basis that the Plaintiff had not been given a reasonable time to remedy breach of covenant under lease as required by s 129 of the Conveyancing Act 1919 (NSW).

Catchwords: REAL PROPERTY – requirements of s 129 of the Conveyancing Act 1919 (NSW) – where lease required lessee to obtain all relevant development consents or approvals for specified use of land – where lessor issued notice to remedy breach of lease – where lessor issued notice of termination of lease 14 days after notice to remedy breach was issued – whether time given to remedy breach of lease was reasonable in the circumstances – whether requirements of s 129 of the Conveyancing Act have been satisfied.
Legislation Cited: - Conveyancing Act 1919 (NSW) s 129
- Environmental Planning and Assessment Act 1979 (NSW)
- Mining Act 1992 (NSW)
Cases Cited: - Casquash Pty Ltd v NSW Squash Ltd (No 2) [2012] NSWSC 522
- Clone Pty Ltd v Players Pty Ltd [2005] SASC 281
- Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7; (2014) 306 ALR 25
- Ex Parte Dally-Watkins; Re Wilson (1955) 72 WN (NSW) 454
- Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268
- Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 325 ALR 188
- Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia [1998] HCA 30; (1998) 195 CLR 1
- Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
- Vanguard Financial Planners Pty Ltd v Ale [2018] NSWSC 314
Texts Cited: - ICF Spry, The Principles of Equitable Remedies (6th ed, 2001, LawBook Co)
Category:Principal judgment
Parties: Drama Unit Pty Ltd (Plaintiff)
Fearndale Holdings Pty Ltd (Administrator Appointed) (First Defendant)
Timothy Cook (Second Defendant)
Representation: Counsel:
D Cook SC/B Phillips (Plaintiff)
S Golledge (First and Second Defendant)
Solicitors:
Dettmann Longworth Lawyers (Plaintiffs)
William James Lawyers (First and Second Defendants)
File Number(s): 2018/353117

Judgment

Nature of the application

  1. By Amended Summons filed on 29 November 2018, the Plaintiff, Drama Unit Pty Ltd (“Drama Unit”), seeks a range of relief in respect of a lease over certain land. The proceedings were originally filed in the Real Property List but were heard in the Corporations List when all parties accepted that they needed an urgent hearing and should, if possible, be determined prior to the determination of two other applications concerning the First Defendant, Fearndale Holdings Pty Ltd (admins apptd) (“Fearndale”), which were listed for hearing at the same time. Two directors of Fearndale, the Messrs Harpley, one of whom occupies a residence on the land appeared, made submissions in the application under r 2.13 of the Supreme Court (Corporations) Rules 1999 (NSW) but were not joined as party to it. By reason of the desirability of judgment in this application, if practicable, before the other matters were argued and determined, I delivered an ex tempore judgment summarising the conclusions I had reached and indicated that I would subsequently deliver more detailed reasons for my judgment. These are my more detailed reasons for judgment.

Factual background

  1. I will not set out the factual background to the proceedings, which have a lengthy and complex history, in detail. However, I will briefly refer to some essential aspects of the chronology. Fearndale owns land which contains a quarry from which clay and shale can be mined, and historically has been mined, which also contains a residence occupied by one of its directors, Mr Garry Harpley.

  2. An Agreement to Lease made on or about 19 December 2016 between Fearndale, Drama Unit and the Messrs Harpley (“Agreement to Lease”) contemplated that Fearndale would terminate the existing lease of a third party, Epic Mining Pty Ltd (“Epic”), over the land and within two months grant Drama Unit a lease in the form annexed, and recorded that Fearndale and Drama Unit had agreed that the Messrs Harpley would be given rights of residence on the land. Clause 2(a) of the Agreement to Lease recorded that the parties were then unable to enter a lease of the land because Fearndale did not have possession of it and that they had entered an agreement “in the expectation that possession will be available by the commencement date of the lease”. Clause 2(b) required Fearndale to “do all things required to obtain possession of the demised premises” by the commencement date. Fearndale ultimately did not obtain possession by that date, but did obtain possession subsequently. Clause 2(c) provided that:

“[Fearndale] and [Drama Unit] will do all things necessary to effect registration of the lease, including but not limited to obtaining any plans required by sch 5 of the Real Property Regulations 2009.”

  1. On or about 23 March 2017, Drama Unit and Fearndale entered into the lease. I will determine a narrow issue as to the form that lease took, as to its front page, below. It will be convenient to refer here to several relevant provisions of the lease. Clause 7.3(4)(a) provided that Drama Unit was deemed to have accepted the lease with full knowledge and subject to any prohibitions or restrictions on the use of the relevant premises under any Law or Requirement (as defined). Clause 7.3(4)(b) provided that:

“At its cost, and prior to entering into this lease [Drama Unit] must obtain and comply with all the Laws and Requirements and obtain and comply with the consents or approvals of any authority which may be necessary or appropriate for [Drama Unit’s] business (including, without limitation, development approval from the local council for [Drama Unit] to occupy and use the Premises for the Permitted Use). During the term, [Drama Unit] must, at its cost, maintain and comply with the requirements of any such consent or approval of any such authority.”

  1. Clause 7.3(4)(c) in turn required that Drama Unit must not, by any act or omission, cause or permit any consent or approval to lapse or be revoked, and cl 7.3(4)(d) required it to provide a copy of any consent or approval to Fearndale prior to the occupation of the premises. Clause 16.7 of the lease in turn provided that the requirement to provide Fearndale with a copy of all relevant development consents or approvals was deemed to be an essential term of the lease. As Mr Golledge, who appears for Fearndale and the Second Defendant, the voluntary administrator of Fearndale, rightly points out, that emphasises the significance of the requirement in cl 7.3(4)(c) of the lease.

  2. Clause 15.2 of the lease in turn provides a mechanism for termination of the lease and for Fearndale to take possession of the land, if Drama Unit defaults in a manner specified in cl 15.1. The defaults specified in cl 15.1 include a failure to perform or observe any of Drama Unit’s covenants or obligations under the lease.

  3. Clause 25 of the lease dealt with the “Permitted Use” of the land and stated that the land had the benefit of an approval for a clay/shale quarry dated 23 May 2004, amended 20 January 2010, and that Drama Unit will comply with all conditions of the approval. The concept of “Permitted Use” was also referred to in item 10 of the schedule to the lease, which identified the “Permitted Use” as “mining operation and as prescribed by”, although that provision was incomplete. The approval to which cl 25 of the lease refers (Ex J1, 1/136) is an approval under the Environmental Planning and Assessment Act 1979 (NSW) given by the Minister for Planning and Environment, which provides development consent for the development and operation of a clay/shale quarry on the relevant land and the construction and use of an access road and service facilities. The fact that that is the document referred to in the lease can readily be inferred from the dates referred to in it, which broadly correspond to the references in cl 25 of the lease (see also McCarthy 30.11.18, Annexure A). It appears that development consent has remained in force at all relevant times and Drama Unit has, in fact, been entitled to the benefit of it, as that clause contemplates. However, a consent to the development of a clay/shale quarry or the construction and use of the relevant access road and service facilities plainly does not exhaust the range of regulatory requirements for the operation of the mine on the land. Clause 25.2 of the lease in turn stated that Drama Unit “will be entitled to the benefit of the approval and will be entitled to extract from the land any materials (being clay, shale, sandstone, topsoil)” including specified activities. Clause 25.2(b) required Drama Unit to at all times observe and comply with all statutes, regulations and ordinances governing or relating to those activities.

  4. Clause 26 of the lease expressly excluded from the lease a house situated on the land and occupied by the Messrs Harpley, with that exclusion to apply during their lifetimes, and provided that the Messrs Harpley were to have a right of occupation as “joint tenants” and, by cl 26.3, that Drama Unit:

“Acknowledges and agrees that [the Messrs Harpley], as joint tenants, have a right to occupy the excluded property, being the dwelling, its curtilage, and the [sic] to use the right of way for life.”

Drama Unit abandoned, in the course of this application, a claim for rectification of the lease to exclude that clause.

  1. By a further deed dated 4 May 2017 (Ex J1, 2270), several parties, including Fearndale, the Messrs Harpley and Drama Unit, recited that the Messrs Harpley had sold the land to Fearndale, inter alia, upon an express agreement that Fearndale acknowledged, agreed and granted to them the right to occupy the residential premises erected upon the land together with the curtilage around the land, which right of occupation was for life and was recognised in cl 32 of a registered lease with Epic, which was then conducting mining operations on the land, which was imported into that deed as though it was set out in full. That document also recited that Epic had acknowledged that right of occupation and that Drama Unit proposed to take a lease of the land if Epic’s lease was brought to an end, and that Drama Unit also acknowledged and accepted the Messrs Harpley’s right of occupation with the effect that the land which was the subject of the right of occupation was excluded from the land leased by Drama Unit on the same terms as set out in cl 32 of Epic’s lease.

  2. A secured creditor of Fearndale (“CCF”) subsequently appointed receivers and managers to Fearndale in September 2017 and then also appointed, in its capacity as a secured creditor, voluntary administrators to Fearndale in March 2018. Those voluntary administrators were subsequently replaced by the present voluntary administrator, Mr Cook. In June 2018, Epic acknowledged that its lease of the land had been terminated.

  3. On 29 June 2018, before Drama Unit took possession of the land, Fearndale, then under the control of its voluntary administrator, served notices to remedy several breaches of the lease on Drama Unit, including a notice (Ex J1, 8/2326) to remedy a breach of the requirement under cl 7.3(4)(b) of the lease that Drama Unit, at its cost and prior to entering into the lease, obtain and comply with the consents and approvals of any authority which may be necessary or appropriate for its business. That notice was directed to a requirement to obtain those consents and approvals prior to the entry into the lease and, in that respect, properly reflected the requirements of that clause. Drama Unit had not obtained any authority to conduct mining operations on the land under the Mining Act 1992 (NSW) before it entered into the lease. That notice allowed Drama Unit 14 days to remedy that breach.

  4. Subsequently, on 13 July 2018, Fearndale served two notices of termination of the lease, the first for non-payment of rent and the second on the basis that Drama Unit had not, at its own cost and prior to the entry into the lease, obtained the relevant consents or approval of any authority which may be necessary or appropriate for the business, within the time to remedy set out in the earlier notice. Only the notice of termination based on the failure to obtain those approvals and consents is now relied on by Fearndale, and the termination of the lease for failure to pay rent is no longer pressed. On 16 July 2018, Fearndale served further termination notices in substantially the same terms. The parties do not suggest that anything turns on the service of the successive termination notices.

Whether the lease is valid and enforceable

  1. With that background, Drama Unit sought a range of relief in its Amended Summons. The first aspect of that relief was interim relief, which was not pressed where this matter has reached an early final hearing not long after the proceedings were commenced.

  2. I now turn to address the range of final relief sought by Drama Unit. First, Drama Unit seeks a declaration that the lease (in a particular form, namely, that found at p 189 of exhibit CM1 to Mr McKinnon's affidavit sworn 10 November 2018) is valid and enforceable. I am not persuaded that I should make a declaration in so wide a form, where a voluntary administrator has been appointed to Fearndale and, so far as the evidence goes, is presently investigating its affairs, which could only be described as extremely complex. It is not apparent that all issues that might impact on the validity of the lease or its enforceability have emerged at this point in the voluntary administrator's investigations. I do not consider that, as a matter of discretion, the Court should, in an ongoing voluntary administration, make a declaration that might foreclose, as between Drama Unit and Fearndale, issues that may in future emerge from the voluntary administrator’s investigations. It seems to me preferable that I instead determine the specific issues that were raised in these proceedings. That determination will bind Fearndale and Drama Unit without foreclosing the possibility that other issues might arise from further investigations that might ultimately need to be determined.

  3. First, a question arises as to the correct version of the lease, where there are two versions which are identical other than for the first page. One version (Ex J1, 3/918) described the leased property by reference to a particular folio number, although that description was arguably inaccurate, because, as I noted above, cl 26 of the lease expressly excluded from the lease a house situated on the land and occupied by the Messrs Harpley. As I also noted above, Drama Unit abandoned, in the course of the hearing, an application to modify the lease to exclude that clause. A second version of the lease, lodged with the NSW Land Registry Services (Ex J1, 3/908), described the leased property, arguably more accurately, as “part of the land” in the folio identifier as described and attached an amended plan, which excluded the area of the land occupied by the Messrs Harpley. It is now apparent, from the affidavit evidence of the then director of Drama Unit, Ms Tabuso, dated 22 November 2018, that the first version of the lease was executed by Drama Unit. It is not necessary to speculate, for the purposes of this judgment, why or how it came to be that a second version of the lease with the arguably more accurate description of the land was subsequently lodged with NSW Land Registry Services. I therefore find that the lease was executed in the first version, as Drama Unit contends, whatever the difficulties with the description of the land that it contained.

  4. A second issue, which occupied a large part of the hearing, is whether Fearndale validly terminated the lease in July 2018, after giving the notice to remedy the alleged breach of it to which I referred in paragraph 11 above in June 2018. Drama Unit submits that that notice was invalid for several reasons, by reference to the terms of the lease and s 129 of the Conveyancing Act 1919 (NSW). I find below that the termination of the lease was invalid, but only for one of the several reasons for which Drama Unit contends.

  5. I turn now to Drama Unit's submissions as to the validity of Fearndale’s termination of the lease. Mr Cook, who appears for Drama Unit, made elaborate submissions, first by a written outline of submissions, then by lengthy oral submissions, then by further written submissions and by short additional oral submissions. Drama Unit has only succeeded on one ground, which is sufficient to invalidate the termination of the lease. In addressing the issues of construction of the lease, I have regard to principles of contractual construction in respect of commercial contracts. I approach the question of construction of that clause by reference to well-established principles of construction. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40], a unanimous High Court observed that:

“This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.” [Citations omitted]

  1. That approach was confirmed in Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7; (2014) 306 ALR 25 at [35] where French CJ, Hayne, Crennan and Kiefel JJ observed that (citations omitted):

"[T]his court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'.” [citations omitted]

  1. The High Court also reviewed the principles of construction in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 325 ALR 188 (at [46]–[52], [59]) and I proceed on the basis that construction should commence with the language used by the parties, although the Court may also have regard to objective surrounding circumstances. I have drawn on my judgment in Vanguard Financial Planners Pty Ltd v Ale [2018] NSWSC 314 for this summary of these principles.

  2. First, Mr Cook submitted that there is no breach of cl 7.3(4)(b) of the lease which, he submits, is found under a heading "No Warranty As to Use" and did not impose any obligation on Drama Unit. The heading is of limited assistance in supporting that submission, where the lease provides in cl 1.9 that headings have been inserted for guidance only and do not affect the construction of the lease. Mr Cook also submits that that clause is directed to obtaining consents and approvals before the lease came into existence. Mr Golledge responds that that clause, in effect, creates an obligation at the point of entry into the lease, that Drama Unit had secured a particular position before entering into that lease, namely that it was compliant with the relevant Laws and Requirements and had obtained and complied with the relevant consents and approvals.

  1. It seems to me that, on its proper construction, cl 7.3(4)(b) does impose the specified obligations on Drama Unit, which attach at the point the contract comes into existence, to have done the specified things before it was formed. The language is mandatory and not the language of an acknowledgement for which Mr Cook contends. That paragraph is directed to Laws, Requirements and relevant consents and approvals and Fearndale had an obvious commercial interest in compliance with that requirement. No doubt that clause could have been better drafted, or more elaborately drafted, to provide for the contract to come into effect first, with those requirements then to be satisfied before Drama Unit obtained a right to occupancy of the land. However, it seems to me that, on an objective construction, the clause as drafted required Drama Unit, in effect, to have complied with those Laws and Requirements and obtained those consents and approval before the lease took effect, or otherwise Drama Unit would be in breach of the lease at the moment it took effect. There is no conceptual difficulty in Drama Unit taking that course, particularly where Drama Unit had ample notice of that requirement, because it was contemplated by the draft lease attached to the Agreement for Lease.

  2. Mr Cook seeks to read down cl 7.3(4)(b) of the lease by the reference to the approval which is referred to in cl 25 of the lease. I do not accept that submission. First, as I noted above, it is apparent that that approval was for particular conduct, for the purposes of the Environmental Planning and Assessment Act, and did not exhaust the regulatory universe. Second, the clauses operate sensibly together, so far as cl 7.3(4)(b) required Drama Unit to comply with the Laws, Requirements and obtain consents and approvals to the extent that extended beyond the existing approval recognised in cl 25 of the lease. Again, Fearndale had an obvious commercial interest in requiring its tenant to obtain such approvals, particularly where the parties must have known the limited scope of the relevant approval which was referred to in cl 25 of the lease.

  3. In opening submissions, Mr Cook appeared to raise a question as to whether authorisation was required under the Mining Act for clay or shale mining. Mr Golledge addressed that proposition in submissions, and it is plain beyond doubt that such approval was required. It is also plain, from the evidence, that Drama Unit had made itself aware of that requirement, and made some desultory and late attempts to begin to put itself in a position to comply with that requirement, which it did not then further progress. Drama Unit, at one point, relied on a suggestion that it, in fact, held the necessary authority, in the form that was Annexure B to Mr McKinnon's affidavit sworn as late as 22 November 2018, which was a document that did not appear to have been executed by the relevant government body. That contention was rightly abandoned in the course of the hearing, and Mr McKinnon rightly acknowledged in cross-examination that that approval did not have effect.

  4. Next, Mr Cook contended that Drama Unit could not breach clause 7.3.4(b) of the lease until it commenced mining operations on the land, which it has not yet done. I do not accept that submission. That construction of the clause would make a nonsense of it, so far as it imposed requirements to be satisfied prior to the entry into the lease, in respect of the conduct of Drama Unit's business, where Drama Unit would likely not have conducted that business on the site until after it had entered into the lease. That reading of the clause also has other fundamental difficulties, namely that it was plain enough what Drama Unit's business was, both in the terms provided by the lease and as a matter of fact. Item 10 of the reference schedule to the lease, to which I referred above, referred to the use of the land for a mining operation. That term was, in turn, adopted for the purposes of cll 1.1(17) and 7.1 of the lease and, as Mr Golledge pointed out, cl 16.7 noted that it was an essential term of the lease that Drama Unit use the land for the use stated in item 10 of the reference schedule, namely for mining purposes. As a matter of fact, there is no suggestion in any of the earlier documents that Drama Unit intended to use the land other than for mining purposes, although there is a late suggestion that it would now consider using the land for other purposes. It is by no means apparent that that alternative use would, in fact, be authorised under the terms of the lease. It seems to me, having regard to the terms of the lease and the evidence as to what Drama Unit, in fact, intended to do, that there can be no doubt that Drama Unit's business was to conduct mining operations and it was required to obtain the approvals and consents that were required for such operations.

  5. Next, Mr Cook contends that the requirement in cl 7.3.4(b) that Drama Unit hold the relevant consents and approvals is not directed to approvals to conduct mining operations, but to development approvals, although that submission may depend on his submission as to the scope of cl 25 of the lease which I have not accepted above. I also do not accept that further submission. That clause required Drama Unit to hold, as the notice of breach issued by Fearndale recognised, an "authorisation" to conduct the mining purposes under the Mining Act. The parties have proceeded on the basis that that would be a mining lease, although I note that the Mining Act itself provides for a range of forms of such authorisation.

  6. Drama Unit also contended that Fearndale could not rely on a breach of cl 7.3(4)(b) because it was in breach of its warranty under cl 25 of the lease. As Mr Golledge pointed out, that clause does not seem to be a warranty, but simply an acknowledgement between the parties of the existence of an approval, a requirement for Drama Unit to comply with it, and an acknowledgement between the parties as to what Drama Unit was entitled to do on the land, which is, of course, consistent with the fact that the clause was directed to defining the “Permitted Use” of the land. There also seems to me to be no breach of any such warranty (if, contrary to my view, the clause was a warranty) where the relevant approval appears to have remained in effect and there is no suggestion that Drama Unit would not have been entitled to carry on the relevant activities on the land, had it obtained the other necessary statutory authorisations and otherwise complied with the terms of the lease. I should add that cl 7.3(4)(b) of the lease itself recognises the existence of regulatory requirements beyond the scope of the approval set out in cl 25 of the lease, by requiring Drama Unit to comply with them.

Requirements of s 129 of the Conveyancing Act

  1. Mr Cook submits, and I accept, that s 129 of the Conveyancing Act requires that a relevant notice identify the breach with particularity and, by reference to the case law, fairly inform the lessee what is required to remedy it. That section provides that a right of re-entry or forfeiture under a proviso or stipulation in a lease, for breach of a covenant, condition or agreement in a lease, is not enforceable by action or otherwise unless and until the lessor serves a notice with specified contents, and the lessee "fails within a reasonable time thereafter to remedy the breach, if it is capable of remedy" and provide compensation, where required, to the satisfaction of the lessor. The requirements of such a notice include that it specify the particular breach complained of and, if the breach is capable of remedy, require the lessee to remedy the breach.

  2. I proceed on the basis, although Mr Golledge contended to the contrary, that the relevant breach was capable of remedy, and the notice must require a lessee to remedy the breach, as it did. It seems to me that the breach was capable of remedy because, even if the relevant authorities had not been obtained prior to obtaining the lease, then they could be obtained at a later stage and Fearndale could be compensated for any loss which it had suffered. The parties did not, I might add, take me to the voluminous case law which deals with the question of a breach arising from a previous act or omission which is capable of remedy.

  3. The object of a notice under s 129 of the Conveyancing Act is to bring to the lessee’s attention to matters which have not been complied with and to allow it the opportunity to remedy the breach: Ex Parte Dally-Watkins; Re Wilson (1955) 72 WN (NSW) 454 at 456; Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268 at [308]–[309]; Casquash Pty Ltd v NSW Squash Ltd (No 2) [2012] NSWSC 522 at [52]. In Macquarie International Health Clinic Pty Ltd above at [309], Handley JA observed that such a notice should alert the lessee “to the particular breaches on which the lessor proposes to rely and what the lessor requires in order to bring about a position where termination would not occur”. His Honour also observed (at [323]) that such a notice must:

“describe the particular acts or omissions constituting the alleged breach; and the notice must indicate the acts of the tenant which the landlord would consider sufficient for the lease to continue, and upon completion of which the landlord would abandon its claim to forfeit. The standard of particulars or degree of specificity depends upon the circumstances, including the nature of the covenant alleged to be breached, the tenant’s actual or constructive knowledge, and whether the landlord claims reasonable compensation.”

  1. The notice, in my view, complied with the requirements to identify the breach with particularity by adopting terms that had a plain and clear meaning under the Mining Act. In particular, as I noted above, the notice of breach of covenant indicated that Fearndale required Drama Unit to remedy the relevant breach by on or before 8pm, 13 July 2018 by obtaining an “in force authorisation” under the Mining Act. The term “in force” has a clear meaning under the Mining Act. The term “authorisation” is also defined in the Mining Act, as including specific matters. Although Drama Unit’s solicitor subsequently wrote to the voluntary administrator’s solicitors asking, in effect, what authorisation Drama Unit was required to have, it seems to me that the information which had been provided in the notice of breach of covenant was sufficient to answer that question, by reference to the requisite authority under the Mining Act. It does not seem to me that the voluntary administrator had to go further to advise Drama Unit, and its legal representatives, as to which particular form of authorisation under the Act was appropriate in Drama Unit’s circumstances, where both the terms of the Act and those circumstances must have been known to Drama Unit, or could have readily been known by a review of the terms of the Act. It seems to me that Fearndale was in no better position than Drama Unit to identify the statutory requirements of the Mining Act that were applicable to Drama Unit and it was sufficient to draw Drama Unit’s attention to the requirement for authority under that Act, and to leave it to Drama Unit to identify, with the assistance of its legal representatives, the particular authority that it required under the Act.

  2. Next, Drama Unit submits that the 14 days’ notice given under the notice to remedy was not “reasonable time” for it to remedy the breach. Section 129 of the Conveyancing Act provides that the right of re-entry or forfeiture is not enforceable unless, relevantly, the lessee fails within a reasonable time to remedy the breach. Here, that period is defined by events, being the period of about 14 days between the issue of notice to remedy the breach and the termination of the lease, or that period plus an additional three days in respect of the second notice to remedy their relevant breaches. I have regard to the discussion of the concept of reasonable time in this context, in Casquash Pty Ltd v NSW Squash Ltd (No 2) above, to which Mr Golledge referred.

  3. Plainly, the question of what is a reasonable time will depend on the relevant circumstances. Mr Golledge made a valiant attempt to seek to establish that there was urgency in the particular circumstances, on the basis that there had been correspondence from Drama Unit’s solicitors to the voluntary administrator indicating that it contended that it had a lease and sought possession of the land. Mr Golledge seeks to characterise that correspondence as amounting to a threat by Drama Unit to go into occupation of the land. Even if that correspondence went that far, Drama Unit had not sought to take that step before either the notice to remedy the breach or the notice of termination of the lease was given. Mr Golledge’s submissions were also somewhat undermined by the fact that the voluntary administrator, in giving evidence, did not himself suggest that these matters created any particular urgency. In his cross-examination, he also fairly accepted, in effect, that the time allowed was a short time for Drama Unit to obtain a mining authority, at least if no previous steps had been taken by Drama Unit, and recognised the relevance of that matter to whether the breach could be cured or a termination notice could be issued. I do not say that critically of the voluntary administrator, because here, as in many cases, a notice to remedy a breach was issued in circumstances that the lessor would regard it as an attractive commercial outcome to terminate the lease.

  4. It seems to me that, on balance and in all the circumstances, the time given to Drama Unit to cure the breach was not reasonable in the circumstances. Notwithstanding that, as Mr Golledge contends, Drama Unit had contended in correspondence, wrongly, that it had the relevant authority, any attempt to obtain an adequate authority was likely to require more than two weeks; there was nothing, it seems to me, in the circumstances that required so short a time, at least when Drama Unit had not, so far as the evidence went, carried through any threat to enter into occupation of the land; and where the voluntary administrator’s own evidence is that he had properly taken steps to secure the land. Although vacant possession of the land would undoubtedly assist a sale of the land, there was no suggestion that such a sale was imminent, or required so short a period to be allowed to remedy the breach. There was nothing else, as far as the evidence went, that required that such a short period of notice be given, and there was no suggestion that there was any particular feature of the voluntary administration that created such urgency. Drama Unit also submitted that I should find that obtaining a mining authority was complex and time consuming, and that may be plausible, but there is no direct evidence of that matter. I do not need to find that matter to find that the time was too short in the relevant circumstances in any event. By contrast with the position in Casquash Pty Ltd v NSW Squash Ltd (No 2) above at [55], it does not seem to me that this is a case where it could be concluded that Drama Unit would not or could not remedy the breach relied on, had a longer period been allowed for it to do so.

  5. It seems to me that the requirements of s 129 of the Conveyancing Act have therefore not been satisfied and, as at the date of the termination notice, Drama Unit had not failed within a reasonable time to remedy the breach, because the termination occurred, or purportedly occurred, before it had been allowed a reasonable time to do so. The right of re-entry or forfeiture is therefore not enforceable by Fearndale for the purposes of s 129 of the Conveyancing Act, and the termination of the lease is ineffective on that basis alone. That, of course, may ultimately not be a victory of great practical benefit to Drama Unit, since there would be nothing to prevent the voluntary administrator, on the views that I have formed, from issuing a further notice that allows a reasonable time to cure the breach, and that time would no doubt have to be judged in circumstances that Drama Unit has had ample notice of the need for the relevant authorisations, not least through these proceedings.

Other issues raised by Drama Unit

  1. In these circumstances, it is not necessary to address further issues raised by Drama Unit as to any question of waiver, or the submission that an authority under the Mining Act could not have been obtained by Drama Unit without Fearndale’s cooperation – a submission which is undermined by the absence of any evidence that Drama Unit ever made any serious attempt to obtain such an authority – or that Fearndale did not issue the notice to terminate the lease in good faith. It is also not necessary to resolve any question whether Fearndale had repudiated the lease at the relevant time, so far as the voluntary administrator was then, at the least, declining to commit himself as to whether Drama Unit had an enforceable lease. It is also not necessary to consider a further submission, made by Drama Unit in supplementary submissions, that the breach was rectified by Drama Unit’s indication of a willingness to address the breach, although that submission is also undermined by its failure to take any substantive steps to do so.

Whether the lease was registrable

  1. Mr Cook also advanced further submissions as to whether the lease was registrable. Neither the Messrs Harpley nor the Registrar-General were joined as a party, although the Messrs Harpley were (as I noted above) heard under r 2.13 of the Supreme Court (Corporations) Rules, as interested persons without becoming party to the proceedings. It appears that Drama Unit anticipated that the Court would express its views as to that matter in order to influence the Registrar General’s decision as to whether to proceed to register the lease. It is not necessary to determine that matter to address the relief sought, and it is not appropriate to do so where the necessary parties to such a determination were not joined to the proceedings. I therefore do not address further submissions made by Mr Smith, who appeared for the Messrs Harpley which seem to me to be largely, although not wholly, directed to protecting the Messrs Harpley’s interest in that respect.

Drama Unit’s claims to a mandatory injunction or specific performance

  1. The next order sought by Drama Unit is in the nature of a mandatory injunction requiring Fearndale to take such steps as are required to ensure registration of the lease in its current form including, only to the extent necessary, the registration of any plan for the subdivision of the land to give effect to the terms of the lease. It will be noted, first, that that order is directed to the registration of the lease in its current form, and, second, that Fearndale abandoned a claim for rectification at the hearing, although that claim is presently still reflected in the form of relief it sought in that paragraph. Alternatively, Drama Unit seeks an order that Fearndale specifically perform and carry into effect the Agreement to Lease by executing a lease in the form attached to the Agreement to Lease and taking all necessary steps for that lease to be registered, including, to the extent necessary, the registration of any plan for the subdivision of the land. That order differs from the injunction sought, so far as it is directed to the form of lease attached to the Agreement to Lease which relevantly excludes the right conferred on the Messrs Harpley to which I have referred above, which is now contained in cl 26 of the lease in the current form. It is convenient to deal with these two orders together, since I would not make either order for largely the same reasons, although there are additional reasons why I would not make the order sought in respect of the Agreement to Lease.

  1. It seems to me that the first of the orders sought, in the nature of a mandatory injunction in respect of the lease in its current form, should not be made for several reasons. The first is that Drama Unit did not offer any undertaking itself to comply with any obligations in respect of registration of the lease. Had it done so, that would have emphasised the practical uncertainly of the form of order sought, which did not identify in specific terms or allocate responsibility between the parties as to what was to be done to secure the registration of the lease. Second, the fact that Drama Unit has not paid any rent for a substantial period, despite its claimed ability and willingness to do so, would be discretionary factor against making such an order. If I were otherwise satisfied that the order should be made, I would have considered making it on a condition that the unpaid rent be paid.

  2. Third, I would not make that order as a matter of discretion, where Fearndale is in voluntary administration, its creditors’ claims may well exceed its assets and there are presently unresolved disputes between Fearndale, its voluntary administrators, CCF and the Messrs Harpley as to entitlement to its property. Drama Unit appears to assume that, if the order was made for Fearndale to take the relevant steps, the voluntary administrator would be required to implement it and I will assume, without deciding, that that is correct. However, there is no evidence of the extent of the practical value of any indemnity available to the voluntary administrator against Fearndale’s assets, particularly where there are competing claims to those assets, including a substantial claim of CCF. I am not persuaded that the Court should make an order that would require the voluntary administrator to incur the expenses necessary to perform the registration for the lease on the part of Fearndale, still less to proceed to a subdivision, where he may or may not have a right of indemnity that is of practical value in respect of those expenses and Drama Unit can properly be left to its claim for damages in respect of any non-performance of any obligation as to registration of the lease in that regard. It is, of course, well established that the Court may have regard to hardship, including hardship to third parties, in determining whether to grant injunctive relief or make an order for specific performance: Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) [1998] HCA 30; (1998) 195 CLR 1 at [65]ff; ICF Spry, The Principles of Equitable Remedies (6th ed, 2001, LawBook Co) at pp 196ff.

  3. It is therefore also not necessary to address the further difficulties that would arise if such an order were made, requiring Fearndale to take steps toward registration of the lease, Fearndale then passed from voluntary administration into liquidation while those steps were incomplete, and a liquidator then exercised its statutory power to disclaim the lease.

  4. I would not make the alternative order by which Drama Unit seeks specific performance of the Agreement for Lease by executing a lease in the form attached to that agreement and taking steps to register it for the same reasons that I would not grant the mandatory injunction sought, and for additional reasons. First, cl 2(c) of the Agreement to Lease expressly imposes the relevant obligations upon both Drama Unit and Fearndale. The order that Drama Unit seeks does not implement those obligations, but changes them, by seeking to impose them upon Fearndale alone. Second, the order that Drama Unit seeks would require Fearndale to execute a different lease to that to which the parties agreed, when they executed the current version of the lease, because the earlier version of the lease did not contain the right conferred on the Messrs Harpley by cl 26 of the current lease. In Clone Pty Ltd v Players Pty Ltd [2005] SASC 281 at [38], to which Mr Golledge referred, Vanstone J noted that, where the parties had executed a lease, they ceased to retain the intention embodied in an earlier agreement to lease and formed instead an intention to be bound by the terms of the lease they had executed, and that the execution of the lease was the performance of the agreement to lease, discharging the parties’ obligations under that agreement, so that the lease was thereafter an exhaustive embodiment of their rights. It seems to me that that result must particularly follow where the parties chose to execute a lease in different terms to that originally contemplated by an agreement to lease. In summary, there is, it seems to me, no reason why the Court should now order that Fearndale alone do what the Agreement to Lease required both Drama Unit and Fearndale to do jointly, or do that by one particular mechanism that may be available to achieve it, such as the registration of a plan for subdivision of the land, or do it in a manner that would bring about a different lease than that by which the parties are presently bound.

Relief against forfeiture

  1. The next order sought by Drama Unit was an order that, if the lease or Agreement to Lease was found to have been terminated by Fearndale on or about 13 July 2018, relief against forfeiture should be granted on such terms as the Court sees fit. I do not understand the notice of termination given by Fearndale to have been directed to the Agreement to Lease, which, by that time, had been superseded by the executed lease. The question does not arise in respect of the findings that I have reached as to the lease, and it is preferable not to address it where it would only arise on a different basis to the findings that I have reached. It can be addressed by any appellate court or be remitted to this division, if an appellate court takes a different view from me as to the matters which I have found, and then be addressed by reference to the different findings which that appellate court has reached.

Order for possession

  1. The final order sought by Drama Unit is an order for possession of the land. Mr Cook initially recognised in oral submissions that the Court could defer making such an order, for a short period, so that Drama Unit may pay the amount of outstanding rent, which it had emphasised its ability and willingness to pay, and would not make an order for possession of the land until that rent had been paid. On that basis, I initially indicated that I did not propose to make an order for possession of the land unless and until such rent has been paid and, if the amount of the rent was not paid within a short period, I would potentially dismiss the application for an order for possession. Following the delivery of my judgment, Mr Cook submitted that he had understood the issue raised in oral submissions to have been directed to the question of relief against forfeiture, rather than (as it was) to the question of an order for possession. Mr Cook noted that the parties had not agitated, and the Court had made no determination as to, the amount of rent due. He submitted that there was or may be a dispute as to that matter, where Drama Unit had not been in possession of the land for a considerable period. The amount of rent due was not raised before me, and I have not sought to determine it. The parties have now agreed that the preferable course is to adjourn Drama Unit’s application for possession to the first Corporations Judge’s directions list in the new term, with liberty to restore for directions only on two business days’ notice. Accordingly, I will direct that paragraph 9 of the Amended Summons filed on 29 November 2018 be stood over to the Corporations Judge’s directions list at 10am on 4 February 2019.

Fearndale’s Cross-Claim

  1. By a First Cross-Claim brought by Fearndale, it sought an order that Drama Unit withdraw two caveats. The parties treated that order as consequential on the determination of the status of the lease. Where I have found that, at least at present, that lease has not been validly terminated, that order should not be made.

Costs

  1. In delivering my ex tempore judgment, I indicated my preliminary view that there should be an order that the voluntary administrator’s costs of the application be costs in the voluntary administration. I also indicated a preliminary view that there should otherwise be no order for the costs of this application as between Drama Unit, Fearndale and the voluntary administrator. Drama Unit had pursued a significant range of arguments, only one of which has succeeded and no order for possession has yet been made. Conversely, the voluntary administrator has succeeded in resisting several aspects of Drama Unit’s application. There may also be a real question whether Drama Unit’s success is of any real practical value, where it would likely be open to the voluntary administrator to issue a further notice of breach allowing further time for rectification for the breach, and terminate the lease if that did not occur. Mr Cook foreshadowed that he would submit that Drama Unit should have its costs of the application. There would, in the ordinary course, be no order as to the Messrs Harpleys' costs of the application, because they intervened under rule 2.13 of the Supreme Court (Corporations) Rules and the ordinary position is that an intervening party does not have its costs of the application. The parties agreed that the question of costs should be deferred until after the determination of whether an order for possession should be made, and I will take that course.

Orders

  1. I therefore make the following orders:

1.   Paragraph 9 of the Amended Summons filed 29 November 2018 be stood over to the Corporations Directions List at 10am on 4 February 2019.

2.   Costs be reserved.

3.   The parties have liberty to restore, for directions only, on two business days’ notice.

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Decision last updated: 17 December 2018

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