Et Petroleum Holdings P/L v Clarenden P/L - [2005] NSWSC 435

CITATION:
ET Petroleum Holdings P/L v Clarenden P/L [2005] NSWSC 435

HEARING DATE(S): 04-07/04/05, 19/04/05

JUDGMENT DATE :

5 May 2005

JUDGMENT OF:
White J

DECISION:
Plaintiff's counsel to bring in short minutes of order in accordance with reasons.

CATCHWORDS:
LANDLORD AND TENANT - Construction of lease - Identification of leased area - Purported termination following s 129 notice - Alleged breaches discussed and ruled on - No question of principle.

LEGISLATION CITED:
Conveyancing Act 1919 (NSW)
Real Property Act 1900 (NSW)
Dangerous Goods Act 1975 (NSW)

CASES CITED:
Sinclair-Lockhart's Trustees v Central Land Board (1950) 1 P & C R 195
Cole v The West London and Crystal Palace Railway Company (1859) 27 Beav 242; 54 E.R. 96;
Hewson v The London and South Western Railway Co. (1860) 8 W.R 467
Steele v Midland Railway Co. (1866) L.R. 1 Ch App 275
Woodfall's Landlord and Tenant, para 5.023
Hayes v Gunbola Pty Ltd (1986) 4 BPR 9247
R v Paulson [1921] 1 AC 271
Finley v Russell-Jones (1948) 49 SR (NSW) 96

PARTIES:
ET Petroleum Holdings Pty Limited
v
Clarenden Pty Limited

FILE NUMBER(S):
SC 4719/04

COUNSEL:
Plaintiff: SA Wells
Defendant: A Radojev

SOLICITORS:
Plaintiff: Conomos & Spinak Lawyers
Defendant: Maatouks Law Group

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WHITE J

Thursday, 5 May 2005

4719/04 ET Petroleum Holdings Pty Ltd v Clarenden Pty Ltd

JUDGMENT

1 HIS HONOUR: These proceedings concern an unregistered lease of a part of premises at 47 Lakemba Road, Belmore. The part leased comprises a service station, convenience store and factory area behind a workshop leased to another tenant.

2 The defendant is the owner of the land. The plaintiff is the lessee. On 16 August 2004, the defendant gave a notice, purportedly pursuant to s 129 of the Conveyancing Act 1919 (NSW), alleging that the plaintiff was in breach of the lease and threatening to terminate the lease if the breaches were not remedied within stringent timeframes specified in the notice. On 17 August 2004, the defendant gave a further notice, purportedly pursuant to s 129 of the Conveyancing Act. On 20 August 2004, the defendant alleged that as a result of an inspection of the property carried out on 18 August 2004, the plaintiff was in further breach of the lease and demanded that the alleged breaches be rectified. On 25 August 2004, the plaintiff obtained an ex parte injunction restraining the defendant from re-entering the premises. On 27 August 2004, that injunction was extended until 2 September 2004 and the defendant was also restrained until that date from taking any steps to terminate the lease. Subsequently, the injunctions were continued until further order.

3 The plaintiff disputes that it is or was in breach of the lease. Alternatively, it says in respect of certain of the alleged breaches that they had been waived by the demand for and acceptance of rent. It contends that if, contrary to its contention, it had breached the lease, the time allowed in the s 129 notices in which to remedy the alleged breaches was unreasonable. It says that any alleged breach was rectified within a reasonable time. It contends that in any event, the notices were invalid as they failed to specify the particular breaches complained of in respect of the covenants referred to in the notices. In the alternative, it seeks relief against forfeiture.

4 There are other matters of contention between the parties apart from the alleged breaches specified in the notices and correspondence referred to in paragraph 2. They are in dispute about the area leased to the plaintiff. They each allege additional breaches of the lease by the other. During the hearing I granted leave to the parties to amend the pleadings so that all of the matters in contention could be resolved. It was necessary to order that three of the further issues raised by the amendments be determined after the determination of the other issues in the proceedings.

The Property Leased

5 One of the reasons for the parties’ ongoing dispute is uncertainty as to the property leased. I will deal with that issue first.

6 On 15 December 2003, the plaintiff and the defendant entered into a lease of premises described as “Part C/321266 Being the Service Station, Convenience Store and Factory Space behind the Workshop known as 47 Lakemba Street, Belmore”.

7 The lease is for a term of five years commencing on 15 December 2003 with two five-year options of renewal. The permitted use of the premises is as a petrol station and convenience store.

8 The property known as 47 Lakemba Street comprises two lots, namely Lot C in Deposited Plan 321266 and Lot A in Deposited Plan 33507. There is one building which straddles both lots. The part of the building which is on Lot C is the convenience store which is the subject of lease to the plaintiff. Part of the area admittedly leased to the plaintiff comprises two small rooms adjacent to and forming part of the convenience store. These are located on Lot A. The remaining part of the building on Lot A comprises a shop, for a time used as a mobile phone shop, and a mechanical workshop. Neither of those parts of the building is leased to the plaintiff. The workshop is leased to JYW Pty Ltd, a company owned and controlled by a Mr Chidiac, who is a relative by marriage of Mr George Maatouk, the sole director and principal shareholder of the defendant. The factory space behind the workshop is on Lot A. The petrol bowsers are partly on Lot C and partly on Lot A. The underground fuel tanks are on Lot A in front of the workshop. The filling points for the underground fuel tanks are on Lot A, as are the “dip points”, being points from which the plaintiff measures the level of fuel in the underground tanks. Vents and pipes for the underground tank storage are also located on Lot A. Reproduced as annexure “A” to these reasons is a plan of 47 Lakemba Street and the adjacent building on Lot B of DP 321266 described as “rendered building Maatouk’s Tyre Service”. That building is owned by JYW Pty Ltd.

9 The defendant contends that the area leased to the plaintiff comprises the factory space behind the workshop wall on Lot A, but no part of the driveway on Lot A up to a point level to the rear wall of the workshop and no part of the forecourt of Lot A where the underground tanks, fuel and dip points and some of the petrol bowsers are situated. The defendant also says that the area leased on Lot C does not comprise the driveway from Lot C to Lakemba Street, nor the side and rear passage depicted on the plan. It also contends, as appears to be common ground, that two toilets on Lot C which abut the side passage are not part of the property leased. Annexure “B” to these reasons is a diagram prepared by Mr Peter Maatouk, Mr George Maatouk’s son. He is also the defendant’s solicitor. The diagram sets out what the defendant contends is the area leased. It shows areas described by Mr Peter Maatouk as “common property”, meaning as I understand it, land owned by the defendant and not leased to any tenant, but in respect of which he says the plaintiff has non-exclusive rights of access. Although not depicted on the diagram, this would include the bowsers and driveway in front of the mobile phone shop, and the fuel and dip points in front of the workshop, as well as the driveway leading from the service station to Lakemba Street adjacent to Lot B of DP 321266.

10 The lease of the workshop to JYW Pty Ltd was in evidence, but that company was not joined as a party to the proceedings. No finding which I make in relation to the rights granted by the defendant to the plaintiff can operate as an estoppel against it. It may be that the defendant has granted inconsistent rights to its respective lessees. If so, nothing in these reasons determines the priorities between the plaintiff and JYW Pty Ltd. JYW Pty Ltd has the prior lease.

11 The lease to JYW Pty Ltd is described as being of “premises known as shop 2, 47 Lakemba Street, Belmore NSW 2192 being part of land contained in certificate of title folio identifier A/335707”. It provides that the lessee has access to the common toilet facilities located on the lessor’s premises. It appears to create no express rights in relation to the use of the forecourt area in front of the workshop. However, the evidence established that the workshop itself can only accommodate two cars and that it has been customary for vehicles of customers of the workshop to be parked in the forecourt area in front of the workshop. There are two entrance points to the workshop. The plaintiff is agreeable to two cars being parked in front of the left-hand door of the workshop and one in front of the right-hand door. It accepts that such parking would not block access by its customers to the petrol bowsers. I assume that its agreement is given on the basis that the parking would not interfere with the plaintiff’s access to the fuel and dip points, when such access is required.

12 However, whilst such arrangements between the two lessees might be sensible, my task is not to make a new agreement for the parties.

13 The plaintiff seeks a declaration that the property leased to it includes all areas within the boundary of the service station premises except for the areas marked “workshop”, “mobile phone shop” and the common toilets.

14 Both parties relied on items 25.3 and 25.4 of the lease. The plaintiff said that by those clauses it acknowledged that the other tenants and their customers would have the right to cross land leased to the plaintiff to gain access to the areas leased to the other tenants. Such an acknowledgment would be unnecessary if the area in front of the workshop and the mobile phone shop, and the side passage on Lot C leading to the common toilets, were not leased to it.

15 The defendant said that by clause 25.3, the plaintiff was given a non-exclusive right to cross land of the lessor to gain access to its leased property, and this was inconsistent with the plaintiff having a lease over the area in front of the workshop and the mobile phone shop.

16 The clauses are poorly drafted, to say the least. On any view they do not delineate any particular part of the property over which the plaintiff has only non-exclusive rights of access.

17 Items 25.3 and 25.4 of the lease provide as follows:

25.3 The Lessor and all other tenants, lessees and licensees hereby acknowledge it may have full and free right and liberty for ingress and egress to the property for their respective clients, customers and business associates with access from Lakemba street to their respective areas leased and or under licence. The Lessee and all subsequent assignees and transferees in title shall not make any objection, requisition or claim for compensation and shall not hinder or obstruct anyone as a consequence of this clause.

25.4 All other Lessees and licensees from time to time of the property shall also have the same right of way to enter/egress in and out of the property including all their customers, agents, employees etc.

18 Although the argument was not developed, I take it that the defendant would construe clause 25.3 as containing an acknowledgment by the lessor that the lessee, i.e. the plaintiff, may have “liberty for ingress and egress” to the leased property over other property not leased to it, for its clients, customers and business associates, thus providing access from Lakemba Street to the area leased to it. In exercising that right of ingress and egress to the property, the lessee shall not hinder or obstruct anyone. Clause 25.4 then provides that other lessees and licensees of the property, e.g. lessees of the workshop or the mobile phone shop, should have the same right of way to enter and “egress” in and out of the property leased to the plaintiff, as shall their customers, agents and employees.

19 On this construction, clause 25.4 is the acknowledgement by the plaintiff that other lessees of the premises may have access over the leased property. Clause 25.3 is a grant by the lessor and purportedly by other lessees and licensees, to the lessee, of non-exclusive rights to the lessee to have access to parts of the property other than the leased property, for the lessee’s better enjoyment of the leased property.

20 Although this is a possible construction of the clauses, there are many difficulties with it. No matter how one tries, the first sentence of item 25.3 has to be changed in some way to make any sense of it.

21 It is impossible for “all other tenants, lessees (a redundant expression) and licensees” to make any acknowledgment of anything in an agreement to which they are not parties. There is no point in the lessor acknowledging that “it”, i.e., the lessor, has any rights. Nor is there any point in the lessor acknowledging that third parties deriving title from it have rights. The acknowledgment must either be by the lessor that the lessee and its clients, customers and business associates have certain rights, or by the lessee that the lessor and the other tenants, lessees, licensees and their respective clients, customers and business associates, have certain rights. The reference to other tenants etc, indicates that it is the lessee and not the lessor who acknowledges that others, including the lessor and other lessees, have rights of access.

22 This view is supported by the second sentence, under which the lessee promises not to make any objections or claims as a consequence of the clause. That part of the second sentence only makes sense if the first sentence is an acknowledgment by the lessee that others have rights over land leased to it. If the first sentence gives the lessee rights over land not leased to it, there would be no occasion for the lessor to protect itself from the lessee making objections or claims as a consequence of the clause.

23 Finally, the words “shall not hinder or obstruct anyone as a consequence of this clause” could have work to do on either construction. If the first sentence gives rights to the lessee over the lessor’s property, it would be a promise by the lessee not to obstruct anyone when exercising those rights. If the first sentence gives rights to the lessor and other lessees and licensees over the property leased to the lessee, those words are a promise by the lessee not to obstruct anyone who is exercising the rights of access over the leased property, which the lessee has acknowledged in the first sentence.

24 Accordingly, I think the better construction of item 25.3 is that the lessee acknowledges that others, including the lessor and its customers etc., have rights of access over the leased property. To some extent, there is an overlap with clause 25.4 which also contains an acknowledgment that other lessees and licensees and their customers etc., can have “right of way to enter/egress” in and out of the leased property. However, item 25.3 gives rights of access over the leased property to the lessor as well, which item 25.4 does not. The evidence shows that Mr Peter Maatouk intends to occupy the shop that was the mobile phone shop. In a lease so badly drafted as this one, it is not surprising that there should be some overlap.

25 Item 25.2 provides that: “At the end of the Lease period all improvements on the property including the building and underground tanks and pipes, fixtures, fittings, plant and equipment are to remain the sole and exclusive ownership of the Lessors.”

26 This clause recognises that the underground tanks and pipes at the commencement of the lease were situated on the leased property. That is only consistent with the forecourt in front of the workshop and mobile phone shop being part of the leased property.

27 The expressions “service station”, “convenience store” and “factory space behind the workshop” are not themselves defined. The description of the leased premises as “Part 2 C/321266” is obviously mistaken. On any view, part of the property leased includes part of the land in Lot A of DP 33507. It is reasonably clear that the common toilets on Lot C of DP 321266 are not included in the property leased. Item 25.6 of the lease describes them as “common toilets” and provides that the plaintiff is responsible for their maintenance and upkeep. The plaintiff is not given exclusive possession of the toilets. The question then is: what other parts, if any, of Lot C are excluded from the lease, and what parts, if any, of Lot A are included, other than two rooms adjacent to the convenience store and the factory space behind the workshop?

28 Adjoining land whose use is necessary for the convenient use and occupation of a building, in other words, which serves the purposes of the building in some necessary or reasonably useful way, may be regarded as within the curtilage of the building and thereby an integral part of it such that, in the absence of a contrary intention in the instrument, it will be conveyed by a conveyance of the building (Sinclair-Lockhart’s Trustees v Central Land Board (1950) 1 P & C R 195 at 204). The same principle applies to leases, so that the lease of a house will include its garden as being necessary for the convenient use and occupation of the house (Cole v The West London and Crystal Palace Railway Company (1859) 27 Beav 242; 54 E.R. 96; Hewson v The London and South Western Railway Co. (1860) 8 W.R 467; Steele v Midland Railway Co. (1866) L.R. 1 Ch App 275 at 289-290; Woodfall’s Landlord and Tenant, para 5.023). It is clear that the driveway which is adjacent to the adjoining tyre shop must be part of the property leased, because customers cars need to use the driveway to have convenient access to Lakemba Street. I also think that the part of the side passageway towards the rear of the property and the passage at the back of the convenience store is so appurtenant to the convenience store and the service station as to form part of the area leased.

29 Similarly, the forecourt and driveway on Lot A of DP 33507 are in my view part of the area leased. That must be so in the case of the forecourt area in front of the workshop and the mobile phone shop as the underground fuel tanks are located under the surface of that part of the land. They clearly form part of the lease of the “service station”. The side passage on Lot A past the workshop forms the only practicable means of access to the factory area behind the workshop and is also part of the leased premises. There is no provision in the lease granting to the plaintiff a mere non-exclusive right of access along the side passageway to the factory area behind the workshop.

30 For these reasons, I consider the plaintiff is entitled to the declaration which it seeks as to the area leased.

Defendant’s Claim that it is Entitled to Terminate the Lease by Re-entry

31 Clause 12.2 provides that the defendant can enter and take possession of the property if -

“12.2.1 The tenant has repudiated this lease; or

12.2.2 Rent or any other money due under this lease is 14 days overdue for payment; or

12.2.3 The defendant has failed to comply with the landlord’s notice under s 129 of the Conveyancing Act 1919 (NSW); or

Conveyancing Act

32 Subsections 129(1), (2) and (9) of the Conveyancing Act provide:

“129 Restrictions on and relief against forfeiture of lease

(1) A right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant, condition, or agreement (express or implied) in the lease, shall not be enforceable by action or otherwise unless and until the lessor serves on the lessee a notice:

(a) specifying the particular breach complained of, and

(b) if the breach is capable of remedy, requiring the lessee to remedy the breach, and

(c) in case the lessor claims compensation in money for the breach, requiring the lessee to pay the same,

and the lessee fails within a reasonable time thereafter to remedy the breach, if it is capable of remedy, and where compensation in money is required to pay reasonable compensation to the satisfaction of the lessor for the breach.

(2) Where a lessor is proceeding by action or otherwise to enforce such a right of re-entry or forfeiture, or has re-entered without action the lessee may personally bring a suit and apply to the Court for relief; and the Court, having regard to the proceedings and conduct of the parties under the foregoing provisions of this section, and to all the other circumstances, may grant or refuse relief, as it thinks fit; and in case of relief may grant the same on such terms (if any) as to costs, expenses, damages, compensation, penalty or otherwise, including the granting of an injunction to restrain any like breach in the future, as the Court in the circumstances of each case thinks fit.

….

(9) The notice mentioned in this section shall be in the form set out in the Sixth Schedule or to a similar effect.”

33 The defendant does not claim to be entitled to terminate the lease for non-payment of rent. It accepts that to be entitled to terminate the lease, it was required to have given notice in accordance with s 129 of the Conveyancing Act. It accepts that in order to be entitled to terminate the lease, it must have given notice under that section which specified the particular breach complained of and required the plaintiff to remedy the breach. It is only if the plaintiff has not remedied the breach within a reasonable time after the giving of notice that it would be entitled to terminate the lease. None of the breaches in question is incapable of remedy.

34 As the lease is not registered, there is a question as to whether s 129 applies. In s 129, the reference to “lease” includes “an agreement for the lease where the lessee has become entitled to have his or her lease granted” (Conveyancing Act, s 128). That section was considered by Young J (as his Honour then was) in Hayes v Gunbola Pty Ltd (1986) 4 BPR 9247. His Honour concluded, (at 9249), that the section applies where, apart from the question of any breach of the lease, the agreement would have been specifically enforceable. In the present case, the plaintiff seeks an order to compel the defendant to register the lease in accordance with its promise in clause 11.4 that it “must ensure that this lease is registered”. The difficulty is the lease is over parts of two current lots, and the Registrar-General may refuse to register the lease, unless the area leased is shown on a current plan and the boundaries of the leased area followed the boundaries of an existing lot (Real Property Act, 1900, s 37, Conveyancing Act, s 23F). The Registrar-General may refuse to register the lease unless a new plan of sub-division is registered. The defendant accepted that, in that event, it would be required to do all that was necessary to prepare and have registered the plan of sub-division.

35 In the meantime, an order for specific performance of the agreement for lease, could only require the defendant to do all that is necessary on its part to enable the lease to be registered. That raises a question as to whether the plaintiff is a person who has become entitled to have his or her lease granted, within the meaning of s 128 of the Conveyancing Act. As neither party contended for a negative answer to that question, and as the lease, considered as an agreement for lease, defines the circumstances in which it can be terminated by reference to s 129 of the Conveyancing Act, it is not necessary to decide that question.

Background to the Service of the First s 129 Notice

36 Prior to 15 December 2003, the service station business was carried on by Mr Paul Maatouk. He is the son of Mr George Maatouk and a brother of Mr Peter Maatouk. The plaintiff bought the service station and convenience store business for $110,000. Mr Paul Maatouk was employed as the site manager. His wife was also employed by the plaintiff, but her employment was terminated on 30 June 2004. A dispute arose between Mr Paul Maatouk and the plaintiff. The directors of the plaintiff are Mr Joe Mangraviti and his son, Nicholas Mangraviti. On 12 August 2004, Mr Joe Mangraviti gave written notice to Mr Paul Maatouk that his position had been relegated to that of console operator and attendant. He was put on a new roster. Mr Joe Mangraviti asked him to hand over the keys to the premises, failing which he said the plaintiff would change the locks and hold him accountable for all expenses incurred. The police were called to the premises. Mr Peter Maatouk made a complaint that Mr Nicholas Mangraviti had taken books and records belonging to the defendant. The plaintiff put up a notice on the convenience store addressed to Mr Paul Maatouk, advising that he was not permitted to enter the store under any circumstances, and that if he did so, charges would be laid against him. On 13 August 2004, Mr Joe Mangraviti accused Mr Paul Maatouk of opening the office door and removing files. Shortly thereafter Mr Paul Maatouk gave notice to the WorkCover Authority that on 11 August 2004 he had suffered a work related injury, being stress and anxiety. He obtained a medical certificate stating that he was unfit to work from 14 August to 18 August 2004. At some unidentified date in August 2004 his employment was terminated, although by whom is not clear. He has not worked for the plaintiff since 13 August 2004.

16 August 2004 Notice

37 It was in these highly charged circumstances that Mr Peter Maatouk gave the first notice. It was expressed to be given “pursuant to s 129(8) of the Conveyancing Act 1919”. Subsection 129(8) of the Conveyancing Act has nothing to do with it. That sub-section provides that s 129 does not affect the law relating to re-entry or forfeiture or relief in case of non-payment of rent.

38 The notice was sent under a covering letter from Maatouk’s Law Group. This is the name under which Mr Peter Maatouk carries on business. The letter demanded payment of rent due on 15 August 2004. It asserted that the plaintiff had changed the locks on the common toilets and the side gate that provided access to those toilets. The letter noted that Mr Peter Maatouk had demanded that he be provided with a copy of the keys and that demand had been refused. It said that Mr Joe Chidiac would be attending the site immediately following the letter to collect the keys, and that if the plaintiff refused to provide the keys, he had been instructed to force open the toilets and have the locks changed. It foreshadowed that the plaintiff would be held accountable for the cost and damage which such actions would cause. The letter demanded that the plaintiff attend to all of the matters raised in the enclosed notice within the time stipulated for each breach. Mr Maatouk said that the defendant would re-enter the premises and change all the locks fourteen days after the date of the letter should the plaintiff fail to co-operate and rectify the breaches. It also gave notice, purportedly pursuant to clause 9 of the lease, that an inspection would take place on Wednesday 18 August 2004. Clause 9 of the lease required the lessor to give the tenant at least two days’ written notice for access, which period was not to include the day of the giving of the notice. However, nothing turns on the fact that proper notice was not given.

39 The notice started by identifying various provisions of the lease. There were nine sub-paragraphs, with the last of the sub-paragraphs identifying three separate provisions. The notice then asserted that the plaintiff had breached those covenants and gave notice that the plaintiff was required “to remedy these breaches by (in order as they appear above):- …”

40 Nine alleged breaches were then specified. On occasions the alleged breaches were repeated, to reflect the corresponding covenant which it was alleged had been breached. Thus, it was twice alleged that on several occasions the defendant had requested the provision by the plaintiff of all relevant insurance policies. The non-provision of those policies was alleged to be a breach of two separate covenants. In respect of each of the nine matters, the notice does sufficiently identify the covenant which it is alleged was breached and the particular conduct alleged to be a breach of the covenant. I will deal with each breach in turn.

Cleaning the Toilets

41 The notice referred to item 25.6 of the lease which provides that the lessee shall be responsible for the maintenance and upkeep of the common toilets. The alleged breach was that the common toilets on the property were “dirty and filthy”. The plaintiff was required to clean them immediately. In item (vii), this was also alleged to be a breach of clause 6.1.3 of the lease. That clause requires the tenant to keep the property clean and dispose of waste properly.

42 The alleged breach was not a breach of clause 6.1.3. The common toilets were not part of the leased property. However, by item 25.6, the plaintiff was responsible for the upkeep and maintenance of the common toilets.

43 In fact, from the commencement of the lease until about 30 July 2004, Mr Joe Chidiac had instructed his staff to clean both the toilets once a week. At about 30 July 2004, he had a confrontation with Mr Nick Mangraviti. It is not entirely clear what the confrontation was about, as there has been a number of disputes between the plaintiff and the defendant which have affected Mr Chidiac’s business. Mr Chidiac said that he was advised by Mr Peter Maatouk that he should stop cleaning the toilets. Mr Maatouk denied giving such advice at that time, but I accept Mr Chidiac’s evidence on this topic.

44 The plaintiff says that it cleaned the toilets. Mr Peter King, who was employed as the petrol service manager from 4 July 2004, deposed to having cleaned the toilets from time to time as required. However, he said that by mid August 2004, the toilets had become increasingly dirty and difficult to clean because of an increased amount of grease being deposited on the toilet floors, walls and washbasins by employees of the mechanical workshop and the next-door tyre shop. Mr Chidiac said that he had five employees who worked in the workshop and tyre shop. Two mechanics worked in the workshop and the rest were in the tyre shop. However, he said that it was only the two mechanics in the workshop who used the toilets in the service station. I accept that evidence.

45 It is clear that the toilets did become very dirty at some time in about mid August 2004. On 15 August 2004, the plaintiff changed the locks on the toilet doors. Mr Joe Mangraviti said that he took that course to try to identify who it was from amongst the workshop or tyre shop employees, who was making a mess in the toilet. Whilst I accept that the floor, washbasin and walls of the toilet were filthy from grease left by one or more of the workmen from the workshop, I do not accept that this was the purpose of his changing the locks. Mr Joe Chidiac was told that he could have the keys again if he signed a letter addressed to the plaintiff. He refused to do so. The letter offered for his signature stated that the plaintiff’s condition of giving Mr Chidiac the key would be that he clean and maintain the toilets. Had he signed the letter, he would have consented to those terms. In my view, the reason the plaintiff withheld the key was to attempt to induce Mr Chidiac to resume the cleaning of the toilets.

46 From 18 August 2004, the plaintiff has allowed unrestricted access to one of the toilets. The other is made available for the public’s use. Mr Chidiac accepts that only one toilet is required for his and his workers’ use. Since the beginning of September 2004, the plaintiff has hired a professional cleaner to clean the toilets once a week. There is no evidence that since 18 August 2004 the toilets have not been properly cleaned and maintained.

47 I consider that there was a breach of the lease in relation to the maintenance and upkeep of the toilets in around the middle of August 2004. Whilst I accept that the toilets became dirty as a result of grease from the workmen using the toilets who were employed in the mechanical workshop, nonetheless, the obligation for the upkeep and maintenance of the toilets was placed on the plaintiff and it was required to keep the toilets clean. For a brief period after Mr Chidiac stopped cleaning the toilets, the plaintiff was in breach of that obligation. However the breach was promptly remedied after notice was given on 16 August 2004. There is no evidence that the defendant suffered any damage as a result of the breach. The notice required the toilets to be cleaned “immediately”. I am not sure what “immediately” denotes in this context. I am satisfied that the toilets were cleaned within a reasonable period after the giving of the notice. There was no failure to comply with the defendant’s notice in respect of this breach and hence the defendant did not become entitled to enter and take possession of the property pursuant to clause 12.2 of the lease.

Insurance Policies

48 In the notice of 16 August 2004, the defendant referred to an alleged clause 25.6 which, it was said, stated that “the lessee must have a current insurance policy covering liability to the public and damage or destruction from any cause to plate glass in windows and any other portions of the property and must produce to the landlord upon request of the policy and the receipt for the last premium” (sic). There was no clause 25.6. Clause 8 required the plaintiff to keep an insurance policy in relation to public liability and damage or destruction to plate glass, and to produce to the landlord upon request, the policy and the receipt for the last premium. The notice also referred to item 19.3, although it mis-stated its terms. Item 19.3 requires the lessee to keep the lessor’s plant and equipment fully insured and to “produce to the lessor when required a certificate of currency in relation to any such policy”.

49 The notice alleged a breach of both clauses. It asserted that the defendant had requested from the plaintiff on several occasions that it provide the defendant with all of the relevant insurance policies. It requested that the policies be provided within 24 hours.

50 The evidence does not establish that prior requests had been made. On 17 August 2004 the plaintiff sent the relevant certificates of currency to the defendant. On the same day, Mr Peter Maatouk replied to the plaintiff, referring to the documents provided, and asked for confirmation that the period of the cover was from 15 December 2003 to 15 December 2004. In his affidavit sworn on 26 August 2004, he deposed that “this was the first time I had seen any policies”. He did not ask for copies of the insurance policies, as distinct from the certificates of currency.

51 In submissions, the defendant said that the documents provided by the plaintiff were not the insurance policies requested, but only the certificates of currency. I do not think it can maintain that submission. The same demand was made under both item 19.3 which refers to the production of a certificate of currency, and clause 8, (wrongly specified as clause 25.3), which refers to the production of the policy. At the time, both the plaintiff and the defendant understood that the request which was being made was for copies of the certificates of currency. The certificates, which were provided from the insurance brokers, summarised the terms of the policies. They were accepted by the defendant as a sufficient description of the policies. The evidence does not establish that the plaintiff had breached the lease by not producing the documents before 16 August 2004, pursuant to a prior request. The plaintiff’s response to the 16 August 2004 notice was a prompt provision of the documents which the defendant was then seeking. The plaintiff did not breach the lease by not providing the insurance policies requested.

Digging up of the Concrete Floor in the Rear Factory Area

52 Item (iv) of the notice referred to clause 6.3.1 of the lease which states that:

“the tenant must not do anything that might invalidate any insurance policy covering the property or that may increase the premium.”

53 In relation to item (iv), the notice stated:

We note that the concrete floor in the rear factory has been cut and removed and soil is exposed, as well as piping and other materials. This is a serious safety and environmental issue and you are required to re-concrete and return the factory floor back to its former condition within 7 days.

54 Item (v) referred to clause 7.5 of the lease which states that:

“if the tenant fails to do any work that the tenant must do, the landlord can give the tenant a notice in writing stating what the tenant has failed to do. After the notice is given the tenant must –

7.5.1 do the work immediately if there is an emergency and

7.5.2 do the work promptly and diligently in any other case.”

55 In relation to that clause the notice stated:

We hereby give you Notice that if the abovementioned factory floor and the works commenced re not completed within 7 days then the lessor shall attend to the rectification of same and shall seek the full costs of repairing same, as well as all other incidental costs including legal fees and expenses to be repaid by you.

56 The matters set out in items (iv) and (v) of the notice, relate to the installation of a further fuel pump in the factory space behind the workshop. By Item 22.1 of the lease, the lessor consented to the lessee adding a further petrol pump in the factory space behind the workshop. The consent was conditional upon all work being carried out by the original contractor who replaced the underground storage tanks and pipes in approximately 2000. The consent to the installation of the fuel pump did not extend to the pump being installed in such a way that its manner of installation might invalidate any insurance policy covering the property.

57 The contractor who had installed the underground storage tanks in 2000 was Mr Paul Caggiano of Pauls Petroleum Services Pty Ltd. In January 2004, he attended an on-site meeting with Mr Nick Mangraviti. On about 12 February 2004, he commenced with the excavations and additions to the petrol storage system. He installed pipes from the petrol tanks containing the racing fuel and ran them to the rear of the factory area. A trench was cut out of the concrete at the rear of the factory area and the pipes were laid in the trench. However the pipes were not connected to the pump which was to be used in decanting the racing fuel. The petrol pump was not delivered until 1 September 2004.

58 The plaintiff was advised by its consultant, Mr Boné, who describes himself as a “dangerous goods consultant”, that a development approval from the council was not required for the carrying out of the work to the decanting station at the rear of the property as the work was minor. This was because the excavations were less than 60 centimetres below ground. However, Mr Peter Maatouk contacted the Canterbury City Council about the works. He obtained advice from the Council that for the development to be undertaken without needing to lodge a development application, the works must be in accordance with the Council’s Development Control Plan No. 31. In about December 2004, an officer of the Council inspected the site and advised the plaintiff that a development application should be lodged. According to Mr Mangraviti, the initial application was rejected by the Council on the basis that the consent of the landlord was required. On 27 September 2004, Mr Maatouk advised Messrs Conomos & Spinak that written consent had been granted in the lease. He said that if the Council did not accept that as sufficient consent, he would arrange for the consent to be provided. An amended development application with the appropriate endorsed consent from the defendant was not received by the plaintiff until early March 2005, and the development application was lodged straightaway thereafter. The plaintiff contends that development approval for the works is not required, but that to satisfy the defendant’s demand, and for more abundant caution, it has sought that consent.

59 On 8 October 2004, Mr Peter Maatouk complained to Messrs Conomos & Spinak, the plaintiff’s solicitors, about a number of matters including the exposed fuel lines. Amongst his complaints was that the lessor’s insurance policy was rendered invalid. In response Messrs Conomos & Spinak pointed out that the exposed fuel lines were not being used and did not contain any fuel. They said that the fuel lines did not pose a danger of any kind. By way of further response Mr Maatouk referred to Australian Standard 1940, but that standard was not in evidence before me.

60 The only evidence that the exposed, but empty, fuel lines might jeopardise the lessor’s insurance policy, or lead to an increase in premium, is contained in a letter, which was admitted without objection, from the insurance brokers CRM Brokers Pty Ltd. This letter was addressed to Mr Maatouk. It is undated, but was received by him on 20 August 2004. It was not provided to the plaintiff, except as an annexure to Mr Maatouk’s affidavit of 26 August 2004. In the letter the broker stated as follows:

“It has come to our attention that there are several issues related to your premises at 47 Lakemba Street Belmore which cause us great concern and that could potentially lead to serious claims and therefore significant premium increase or even future renewal being declined.

The issues of concern are:

….

2. Exposed fuel pipes in a hole dug in the rear of the workshop area. This is a very serious situation in breach of EPA and WorkCover regulations, as we understand them.

As your broker I must also point out that this situation was not related to the Zurich underwriters who accepted the risk and could in some circumstances lead to difficulty in settling a claim.”

61 The defendant did not call the broker. There was no evidence of the instructions given to the insurance broker on which he based the opinion set out in that letter. The broker did not identify what he understood to be the legal requirements which were breached. None was identified before me. The notice did not assert that the plaintiff was in breach of clause 6.1.4 of the lease which required it to comply with all laws regulating how the property was used.

62 I infer that the letter was written at the behest of Mr Maatouk, and that the only information which the broker had was such information as Mr Maatouk conveyed to him. There was no evidence as to what that was.

63 None of the insurance policies covering the property was tendered. The policies obtained by the plaintiff were current until 25 February 2005. There was no evidence that any insurer has declined to renew an insurance policy, or has threatened to increase any premium. I do not consider that the broker’s letter has any weight. The evidence does not establish that the digging of the trench at the rear of the property with the exposed pipes, which do not contain fuel, might invalidate an insurance policy covering the property or might result in an increase in premium.

64 The work about which the defendant complains was carried out in February 2004. No complaint about the work was made until the notice of 16 August 2004. I do not have to decide whether the defendant knew of the condition of the area behind the workshop during this period, during which it collected rent. The defendant has not established that this work was a breach of clause 6.1.3 of the lease, or that the plaintiff was required to cover over the trench.

Changing the Locks

65 Item (vi) of the notice referred to clause 7.6 of the lease. That clause states that:

The tenant must not make any structural alterations to the property and the other alterations require the landlord’s consent in writing (but the landlord cannot withhold consent unreasonably).

We note that you have changed the locks on the common toilet doors and the gate leading to them. You do not have our express approval to carry this work out. Other tenants and members of the public are permitted to use these facilities. We demand that they be opened immediately and that you provide Mr Joe Chidiac (on our behalf) a copy of these keys immediately. …

66 In paragraphs 45 and 46 above, I have dealt with the plaintiff’s explanation for changing the locks to the toilets. There were also gates across the side passage of Lot C which, when padlocked, prevented access to the toilets. They also provided security to “Swap & Go” gas bottles which the defendant stored in the side passage. On 19 August 2004, Mr Peter Maatouk attended the premises and cut the chain on the back fence. He also removed one of the gates. The plaintiff says that the side gates were locked to stop the public accessing the gas bottles which were stored behind the gate. I accept that evidence. Mr Maatouk said that the reason he removed the gate was because the plaintiff had chained it to stop the other lessees from entering what he called the “common area” and the common toilets. He also said that the gas bottles placed behind the gates were placed on a common area and no permission had been granted by the defendant to use that area for such storage.

67 These events involved breaches of the lease by both parties. The plaintiff was not entitled to deny access to the toilets by the other lessees. However, since 18 August 2004, it has allowed access to the toilets. I do not accept that chaining the gates was a structural or other alteration which required the lessor’s consent. Subject to the plaintiff complying with its obligations under clause 6.1.4 of the lease to comply with all laws regulating how the property was used and to obtain any necessary licences, it was entitled to store the Swap & Go gas bottles behind the gates. The area which Mr Peter Maatouk described as “common property” is part of the premises leased to the plaintiff. However, the plaintiff was in breach of clause 6.1.4 of the lease by not having the required licence under the Dangerous Goods Act for the storage of the gas bottles. That was not a breach asserted in the s 129 notice of 16 August 2004. It did not justify Mr Peter Maatouk’s breaking the chain around the gates and taking away one of the gates.

68 By changing the locks on the toilets, the plaintiff committed a breach of the lease. It was not a structural alteration, but it was nevertheless an alteration which required the lessor’s written consent. That breach was rectified by 18 August 2004. I am not satisfied that its chaining of the side gates was a breach of the lease. It was not an alteration to the property. The plaintiff said that the gates were chained in order to secure the Swap & Go gas cylinders. There was no evidence that anyone who wanted to access the toilets could not do so because of the chaining of the gates. There is no doubt that the gates would have had to have been unlocked for somebody to access the toilet, but there is no evidence that the plaintiff refused, or would have refused, any request for the gates to be opened to permit that to occur. Accordingly the only breach which was established was one which was promptly remedied after the notice given on 16 August 2004. The defendant did not become entitled to enter and take possession of the property by reason of that breach.

Advertising Signs

69 Item (viii) of the notice referred to clause 6.3.4 of the lease. It states that the tenant must not display signs or advertisements on the outside of the property without the landlord’s consent, but the landlord cannot withhold consent unreasonably. The alleged breach of clause 6.3.4 was as follows:

You have not been provided with our consent to display any ‘A’ frame signs or advertising on the driveway. These are a safety hazard. Have these removed immediately. You are also required to remove the large banner on the driveway as our consent was not granted and this is also a safety hazard. Please have this removed immediately.

70 I accept the evidence of Mr Joe Mangraviti that the plaintiff did not have any “A” frame display stands on the site and that the only “A” frame which was on the site in August 2004 was one which referred to “Maatouk’s Ute Rentals”. I infer that that belonged either to the defendant or JYW Pty Limited and was placed with the consent of the defendant. In his oral evidence Mr Peter Maatouk said that he was not referring to that sign, but to a sign advertising “Mrs Mac’s Pies”. There was no corroboration of that evidence. The specific allegation was not articulated prior to Mr Peter Maatouk giving evidence. It was not suggested to any of the plaintiff’s witnesses that that was the sign in question. The defendant has not established that the plaintiff was in breach of the lease in having an “A” frame sign on the driveway without the lessor’s consent. In any event, if there had been such a breach, it was promptly remedied.

71 The alleged breach in relation to the large banner on the driveway is a different matter. A large banner has been strung from two poles on the forecourt of the service station, advertising the sale of unleaded racing fuel from the pump. The banner was put up in January 2004. Mr Peter Maatouk said that he did not notice it until April or May 2004, but that evidence must be mistaken. It was plainly visible from the time it was erected. The defendant made no complaint about the erection of the banner until its notice of 16 August 2004. Although the defendant did not give written consent to its being erected, it plainly consented. It accepted rent knowing of the erection of the banner. It is estopped from asserting that the erection of the banner is a breach of the lease. (R v Paulson [1921] 1 AC 271 at 282-3; Finley v Russell-Jones (1948) 49 SR (NSW) 96 at 101).

72 It appears that after the notice of 16 August 2004, instead of taking the banner down, the plaintiff erected a new banner. That is not the subject of any notice. No issue has been pleaded in relation to the erection of that banner.

73 Accordingly the defendant was not entitled to require the plaintiff to remedy the alleged breach referred to in Item (viii) of the notice.

Payment of Instalments of Loan

74 The purchase price of $110,000 for the purchase of the business from Mr Paul Maatouk was financed by a loan from the defendant. The loan was repayable by eleven monthly instalments of $10,000 commencing on 15 December 2003. Item 24.3 of the lease stated that the terms and conditions of the loan were to be considered as if they were repeated in the lease. In Item (ix) of the notice of 16 August 2004, the defendant demanded payment of the instalment due on 15 August. The payment was made by 25 August 2004. The full amount of the loan has been repaid. The defendant did not submit that it was entitled to terminate the lease for the delay in paying the instalment due on 15 August. Clearly it was not.

Painting the Fascia

75 The notice of 16 August 2004 also stated that the defendant had painted the fascia of the canopy with a red indoor paint. It said that the plaintiff had not given consent to the defendant to paint over baked colorbond. The notice demanded that the plaintiff pay Mr Peter Maatouk $8,500 as the estimated cost to restore and replace the canopy back to its original condition as compensation for the breach already committed.

76 On 17 February 2004, Mr Peter Maatouk had written to the plaintiff complaining that fixtures had been painted without its consent and that damage had been caused to the awning which required structural changes. The painting in question was done before 17 February 2004. I accept the plaintiff’s evidence that the paint which was used was not an interior paint. The paint which was used was described by the supplier as an outdoor paint. The defendant has had notice of the matters which were alleged to be a breach of the lease since at least 17 February 2004. It made no further complaint until 16 August 2004. In the meantime, it elected to keep the lease on foot by accepting rent. It is estopped from asserting that it is entitled to terminate the lease for the alleged breach. Nor is it entitled to demand compensation for the alleged breach or to re-paint the premises. The premises have been re-painted in the colours and style associated with the plaintiff’s business. At a meeting with Messrs Peter and Paul Maatouk on 6 December 2003, Messrs Joe and Nick Mangraviti told the Messrs Maatouk that they would be painting the service station in their corporate colours of red, white and blue. Mr Peter Maatouk said that that would not be a problem. The defendant is estopped from asserting that the plaintiff was in breach of the lease in re-painting the service station.

Conclusion on 16 August 2004 Notice

77 For these reasons, when the 16 August notice was given, the plaintiff was in breach of the lease in relation to the cleaning of the common toilets and the changing of the locks on the common toilet doors. It was also then a day late in paying the loan instalment due on 15 August 2004. Otherwise the breaches alleged in the notice have not been established. The breaches were promptly remedied. The defendant is not and has not been entitled to terminate the lease by reason of the alleged breaches.

Section 129 Notice in Letter of 17 August 2004

78 The following day Mr Peter Maatouk sent another letter to the plaintiff. He asserted that in breach of clause 6.3.2 of the lease, the plaintiff had refused to turn on the air compressor. He said that the plaintiff was required to have the compressor turned on during business hours and failing to do so would result in the compressor being relocated and disconnected from the plaintiff’s section of the property. He stated that he had been advised that the plaintiff had relocated the compressor and that that was done without the defendant’s consent. He purportedly required the plaintiff either to relocate the compressor back to its original position, or to have a sound-proof room and cover made for the compressor. He said that the compressor should be protected from all climate and weather elements, and should not affect the residential neighbours. He gave the plaintiff forty-eight hours to rectify the problem and said that the letter was to be considered as a notice under s 129 of the Conveyancing Act. If the issue was not rectified, he gave notice that the defendant might re-enter the property within fourteen days due to this alleged breach.

The Air Compressor

79 Item 19.1 of the lease provided that the defendant leased to the plaintiff items of plant and equipment set out in the inventory. One of those items was the “Air Compressor located behind Workshop”.

80 By leasing that piece of equipment to the plaintiff, the defendant gave the plaintiff the exclusive right of possession and use of the equipment. The lessee was required to pay all of the costs and expenses of maintenance and repair and to replace the equipment, if it needed to be replaced, notwithstanding that the replacement was due to fair wear and tear.

81 When the lease commenced, the air compressor was situated under cover behind the workshop. As noted previously, by Item 22.1 of the lease the lessor provided its consent to the lessee adding a further petrol pump in the factory space behind the workshop. Before the lease was entered into, Messrs Joe and Nicholas Mangraviti had meetings with Messrs Peter and Paul Maatouk about the installation of the fuel pump at the rear of the workshop. There was also a meeting between Mr Nicholas Mangraviti, Mr Paul Maatouk and Mr Boné, the plaintiff’s dangerous goods consultant. During two of those meetings Mr Paul Maatouk, and in one of the meetings Mr Peter Maatouk, was told that one of the requirements for installing the pump in the factory space behind the workshop was that the air compressor would have to be moved. It would be dangerous and contrary to law for the electrical air compressor, which could emit sparks, to be in the vicinity of the fuel pump. In January 2004, the compressor was moved. Mr Paul Maatouk and Mr Chidiac assisted with its removal. It was moved to behind the convenience store in the passage. It was then provided with a makeshift cover consisting of a piece of colorbond resting on four milk crates. It is an all-weather compressor.

82 The plaintiff was not in breach of the lease in moving the compressor. It had to be removed to allow the installation of a fuel pump behind the workshop, for which the lease specifically provides. In any event, there is nothing in the lease which could prevent the plaintiff from moving the air compressor which it is leasing, to any part of the leased premises. I have found that the area to which it has been moved is part of the premises leased to the plaintiff.

83 Nor is there anything in the lease which requires the compressor to be housed in a sound-proof room or cover, unless that is required either to comply with any laws regulating the use of the property or the conduct of the lessee’s business (clause 6.1.4), or if it is necessary to prevent the use of the property from becoming a nuisance (clause 6.3.2). There was no evidence that the present location of the air compressor was contrary to any law relating to the use of the premises, or a nuisance. Hence the defendant’s demand in Mr Maatouk’s letter of 17 August 2004 in relation to the location and housing of the air compressor was unjustified.

84 Mr Maatouk’s demand that the plaintiff not turn the air compressor off during business hours is surprising, if regard is had only to the terms of the lease. The equipment was leased to the plaintiff. However, when the lease commenced the compressor was also used by Mr Chidiac for his business in the workshop.

85 The electricity supply to the compressor was sourced from the workshop. When the compressor was moved in January 2004, the electrical supply to the compressor was re-wired. The source of the supply was still through the mechanical workshop, but a switch was installed in the storeroom at the rear of the convenience store, (which is leased by the plaintiff), which enabled the plaintiff to switch off the power. There was also a switch on the compressor itself.

86 There is a dispute between the plaintiff and the defendant as to who is liable to pay for the electricity consumed on the premises. There is one power supply. The defendant says that the plaintiff is liable to pay for all of the costs of the electricity consumed on the site, including the electricity consumed by the mechanical workshop and the mobile phone shop. The defendant says that the workshop and the phone shop were required to provide the plaintiff with a contribution towards the electricity per quarter in the amounts of $200 and $100 respectively. Mr Peter Maatouk says that he delivered a letter to that effect to Mr Joe Mangraviti on 9 December 2003 before the lease was entered into. Mr Mangraviti denies receiving such a letter. He says that the defendant is required to pay the cost of the electricity. That is a dispute which has been stood over for determination at a later date.

87 On 15 August 2004, Mr Peter Maatouk demanded payment of rent. Mr Mangraviti asserted that he had fourteen days in which to pay it and Mr Maatouk threatened to take “appropriate action” if it were not paid on that day. On that day Mr Mangraviti complained to Mr Maatouk that the plaintiff was paying the electricity for the whole site. He took the provocative step of instructing the plaintiff’s staff not to turn on the air compressor, because the workshop was using the service and was not contributing to the electricity payments.

88 Mr Chidiac said that the reason he had not contributed to electricity payments to that date was that he had not been asked.

89 On 19 August 2004, Mr Peter Maatouk attended the premises. From the workshop, he cut the wire which led from the storeroom to the main electricity board in the workshop. Later, the air compressor lead was reconnected to the mechanical workshop. Mr Peter Maatouk applied superglue to the switch on the compressor to keep the switch in an on position. He took these steps to prevent the plaintiff from turning off the electricity to the air compressor and preventing its use in the mechanical workshop. He claimed he was entitled to do so because the air compressor was a common facility, and the plaintiff was not entitled to prevent its use by the mechanical workshop.

90 When the lease was entered into, the air compressor was wired directly through the main electricity switchboard in the workshop and provided air both to the workshop and the service station. After the lease to the plaintiff was entered into, the workshop continued to use the air compressor. However, it is one of the items leased to the plaintiff. The defendant gave exclusive use of it to the plaintiff. The defendant was in breach of its covenant of quiet enjoyment by interfering with the compressor. Whilst the turning off of the air compressor was a provocative act by the plaintiff which may have been in breach of an inferred arrangement between it and Mr Chidiac, it was not a breach of the lease.

91 Clause 3.4 provides that if the property leased had facilities and services shared in common with other persons in the same building as the property, clause 11.3.2 applied to those common facilities. Clause 11.3.2 imposes an obligation on the landlord to allow reasonable use of such facilities. It also provides that the landlord can set reasonable rules for sharing of common facilities. The compressor was not a “common facility”, even though it had been used as such. It was a leased item. In any event, the landlord had not previously set reasonable rules for the sharing of the facilities.

92 Mr Maatouk also demanded that the compressor be protected from all climate and weather elements. The plaintiff is required to comply with all laws regulating how the property leased is to be used. However the evidence does not show that the compressor is required to be housed in the way Mr Maatouk demanded. Accordingly, none of the demands made by Mr Maatouk in his letter of 17 August 2004 were valid.

93 An additional issue has arisen in relation to the wiring of the air compressor. On 23 September 2004, Energy Australia issued a defect notice in relation to the wiring of the air compressor. Insofar as the notice relates to the rewiring work which the defendant carried out, as between the parties, it is the defendant’s obligation to comply with the notice. The interference by Mr Maatouk of the wiring of the compressor was a breach of the lease. It is not clear to me to what extent the defect notice from Energy Australia relates to rewiring carried out by the defendant, to wiring within the mechanical workshop, or to rewiring on the leased premises which is not attributable to Mr Maatouk’s interference. If the notice relates to rewiring of the mechanical workshop or to rewiring of work carried out by Mr Maatouk or persons on his direction, as between the parties, it is the defendant’s responsibility. However, insofar as the notice relates to wiring on the property leased to the plaintiff, and the work specified in the notice is not required because of the work carried out by or on the direction of the defendant, as between the parties, the plaintiff is required to ensure that the notice is complied with. The allocation of responsibility between the parties does not affect the responsibility of either or both of them to comply with the law pursuant to which the notice was issued.

Further Breaches Alleged in Mr Maatouk’s Letter of 20 August 2004

94 Some of the breaches alleged in Mr Peter Maatouk’s letter of 20 August 2004 to Messrs Conomos & Spinak, the plaintiff’s solicitors, have already been addressed. The letter was not a notice under s 129 of the Conveyancing Act and the defendant is not entitled to terminate the lease on the basis of the matters alleged, even if the breaches are established.

95 I will deal with the additional alleged breaches.

96 Paragraph 2 of the letter said that two petrol pumps had been damaged. These pumps were damaged by cars driven by members of the public and have been repaired.

97 Paragraph 4 complained that “Swap & Go” LPG gas bottles were “stated” (sic) in the “common property area”. Mr Maatouk demanded that the goods be removed from what he called the common property, and said that if they were to remain on the leased property the plaintiff was required to provide a dangerous goods licence for them to the defendant within twenty-four hours.

98 For the reasons I have given, the Swap & Go gas bottles were located on part of the property leased to the plaintiff.

99 However a dangerous goods licence was required. This licence was not obtained until 12 April 2005. An application had been made to WorkCover for an amended licence to cover the storage of the Swap & Go gas bottles. That application was made on or about 1 September 2004. Mr Boné, the plaintiff’s dangerous goods consultant, had expected it to be issued as a matter of course. It does not appear why the licence was not given until a further copy of the plan was sent to WorkCover on 12 April 2005. However, a licence was required and was not obtained. In the meantime the plaintiff stored Swap & Go gas bottles on the property. This was a breach of the lease. However, as this breach was not referred to in a s 129 notice, the defendant did not become entitled to terminate the lease by reason of that breach. Nor has the defendant established that it has suffered any damage by reason of the breach.

100 Had the breach not been rectified, a question would have arisen as to whether the plaintiff should be denied the equitable relief it seeks by way of specific performance of the agreement for lease. As the breach has been rectified, I do not think that the plaintiff should be denied relief by reason of the breach. It will be relevant to costs.

101 The letter alleged that there were insufficient warning signs on the driveway and the premises. However no submissions were made by the defendant about that matter. It has not been shown that there was a breach of the lease by reason of inadequate warning signs.

102 Another alleged breach was that racing fuel was stored in drums inside the storage room at the service station. The defendant sought written evidence that this was permitted by WorkCover and covered by a dangerous goods licence.

103 However the evidence was that no such racing fuel was stored in drums in the storage room.

104 The letter complained that downpipes on the rear factory canopies had been broken and that the portable office in the factory had a broken steel beam blocking the door.

105 These matters both related to alleged defects to the structure of the premises. It seems that in fact there was no broken steel beam. Clause 7.1.1 requires the landlord to fix structural defects. The matters in question, if they were defects, were defects to the structure to leased buildings, which were the defendant’s responsibility to fix.

106 The letter demanded that weeds and grass be removed within seven days. No submissions were made by the defendant about that matter. The photographs which were tendered show that the weeds and grass were removed, although not necessarily within seven days.

Defendant’s Cross-Claim: Bricking Up of Two Rear Windows at the Rear of the Workshop

107 The defendant alleges that in or about January 2004, the plaintiff bricked up two windows at the rear of the workshop leased to JYW Pty Ltd, without its written consent. It alleges that these actions were in breach of clauses 6.3.2 and 7.6 of the lease. On 15 September 2004, the WorkCover Authority of NSW issued an Improvement Notice to the defendant requiring remedial work to be carried out to improve ventilation in and around the workshop.

108 There is a gate on the driveway from Lakemba Street to the factory area at the rear of the workshop. The gate is located a little past the point where the driveway is level with the entrance to the workshop. The defendant demanded that the plaintiff move the gate so that it was aligned with the rear wall of the workshop. The defendant wished to work from the driveway to unbrick two side windows of the workshop which had been bricked up before the lease commenced. On 24 September 2004, Mr Peter Maatouk wrote a letter to Messrs Conomos & Spinak in which he advised that:

“Our client will attend the property on Saturday 2 October 2004 and arrange for the gate to be relocated. Please ensure that the key to the padlock is available for collection from the service station store or otherwise the lock will be cut off to allow access.”

109 This was a threatened breach of the lease by the defendant. For the reasons I have given, the gate is on part of the property leased to the plaintiff.

110 On 1 October 2004, Mr Maatouk said that the plaintiff was required to comply with the WorkCover notice of 15 September 2004, which required remedial work to the ventilation in the workshop area and that this required the gate to be relocated and the two side windows to be opened. He continued that:

It is your client’s bricking up of the two rear windows that has forced our client to go through this expense. Your client did not obtain our client’s written approval prior to altering its property.

111 By its cross-claim, the defendant complains of that alleged breach of the lease.

112 The defendant did not give written consent to the bricking up of the windows in the rear wall of the workshop. The work was carried out in January 2004. No complaint was made about it until September 2004. The defendant, through at least Mr Peter Maatouk, gave oral consent to the work being done before the lease was entered into. Three meetings took place at the premises in November and December 2003, at which there was an inspection of the relevant area. The second meeting took place on 3 December 2003. That meeting was attended by Mr Nicholas Mangraviti, Mr Barry Boné and Mr Paul Maatouk. It had been proposed that the plaintiff would install a fuel pump at the rear of the workshop. Mr Boné told Mr Nicholas Mangraviti during this meeting that the installation of the fuel pump would require that the windows of the workshop facing onto the rear factory area be bricked up, that the air compressor be moved, and that electrical wires in the factory area would need to be removed. Mr Paul Maatouk was advised of these matters.

113 On Saturday 6 December, 2003, a further meeting was held on site attended by Mr Joe Mangraviti, Mr Nicholas Mangraviti, Mr Paul Maatouk and Mr Peter Maatouk. Mr Joe Mangraviti gave evidence that at the meeting he said that because of where the plaintiff proposed to position the fuel pump, it would be necessary for the windows at the rear of the workshop to be bricked up, the air compressor moved and rewiring done. Mr Nicholas Mangraviti also deposed that he told Mr Peter Maatouk at a site meeting that the windows would need to be bricked up. Mr Paul Maatouk confirmed that at the meeting which he attended with both Nicholas and Joseph Mangraviti and his brother, Peter, Joseph Mangraviti said the windows at the rear of the workshop might need to be bricked up. This was in the context of what was needed to install the further fuel pump behind the workshop.

114 Mr Peter Maatouk denied that he was told that it would be necessary to brick up the windows and said that at that stage the Mangravitis had no idea where they were going to put the pump. He said he gave permission to them to install a pump and use it to decant fuel, but asserted that he gave no consent to any other modification.

115 I do not accept this evidence. I find that the parties did discuss the intended location of the fuel pump and that Mr Peter Maatouk, as well as Mr Paul Maatouk, was advised that that would require that the rear windows to the workshop be bricked up. Not only is that consistent with Mr Paul Maatouk’s evidence, but it is consistent with what happened.

116 By item 22 of the lease, the defendant gave its consent to the installation of a further petrol pump in the factory space behind the workshop, conditional upon the work being carried out by the named contractor. That consent impliedly carried with it consent to the defendant carrying out other work which was required to comply with the law relating to the installation of the pump. Although the “factory space behind the workshop” was not specifically identified in the lease, I am satisfied that the parties had identified where the pump was to be installed.

117 The work of bricking up the windows was carried out in January 2004 with the full knowledge of Mr Paul Maatouk. On Peter Maatouk’s return from Lebanon at the end of January or early February 2004, Paul Maatouk told his brother about the work which had been done. No complaint was made by the defendant about the bricking up of the windows at the rear of the workshop until the plaintiff complained in about September 2004 to the WorkCover authority about fumes coming from the workshop and the WorkCover authority required that the workshop’s ventilation be improved.

118 Having regard to item 22 of the lease, the lessor’s written consent was not required to the work which was incidental to the installation of the pump, which included the bricking up of the workshop windows. The consent of the lessee of the workshop would have been required, but apparently the lessee did not object. Even if there were a breach of the lease in carrying out this work without the written consent of the lessor, the breach was waived when the defendant accepted rent after January 2004.

119 I therefore reject the defendant’s claim that the plaintiff was in breach of the lease by bricking up the windows at the rear of the workshop.

120 Neither party has raised in its pleadings the question of whether the unbricking of the side windows to the workshop would put the defendant in breach of the lease as being inconsistent with the authority given to the plaintiff to install the fuel pump at the rear of the workshop. That question principally concerns JYW Pty Limited, the occupier of the workshop. I express no opinion about it.

Alleged Breaches of Lease by the Defendant

121 The plaintiff complained that the defendant is in breach of the lease in a number of respects. It complains about Mr Peter Maatouk’s rewiring of the air compressor and his attempting to superglue the air compressor into the “on” position. I have already found that this was a breach of the plaintiff’s right of quiet enjoyment. The plaintiff has not established that it has suffered any damage as a result of the breach. It seeks an order directing the defendant “to rewire the power source to the air compressor and oil separator pump so that the plaintiff has access to the power source for this equipment on the premises leased to the plaintiff.” There has been no hearing of the issues relating to the water/oil separator and its associated pump. So far as the air compressor is concerned, the plaintiff is not entitled to the mandatory relief sought. Since the commencement of the lease the power source for the air compressor has been in the mechanical workshop and there is no implication from the grant of a lease of the equipment that the defendant was required to rewire the equipment to a new power source on the leased premises. The plaintiff does not seek an order that the defendant reinstate the wiring to its condition before Mr Maatouk’s interference. In any event, I would be reluctant to make such a mandatory order which may adversely affect JYW Pty Limited. The plaintiff has not shown that it is likely to suffer damage as a result of Mr Maatouk’s actions for which damages would not be in adequate remedy. The real question is who has to pay for the electricity. That issue is yet to be determined.

122 The plaintiff also complains that the cutting of the chain on the back fence by Mr Peter Maatouk was a breach of the covenant of quiet enjoyment. I agree. Again, however, the plaintiff has not established that it suffered any damage as a result of the breach.

123 It complains that customers of Maatouk’s tyre shop have parked their cars on the leased premises and blocked the plaintiff’s customers’ access to fuel pumps. That may be so, but it does not put the defendant in breach of the lease.

124 The plaintiff complains that on 4 September 2004, Mr Peter Maatouk attended the leased premises and carried out an inspection without giving any prior notice to the plaintiff. No submissions were made about this matter. If it were a breach of the lease, no damage was suffered by the plaintiff as a result of it.

125 The plaintiff also says that the defendant is in breach of the lease by not removing steel threads which protrude from the ground in the forecourt area and to which a sign had previously been affixed. It relies upon clause 11.3.1 of the lease which obliges the defendant to maintain in reasonable structural condition “all parts of the building that the tenant can use under this lease”.

126 The plaintiff complained about the steel threads in its letter of 23 February 2004 to Mr Peter Maatouk. He replied on the following day to say that the steel threads would be looked at in due course. The steel threads are certainly unsightly. They are located on what appears to be a steel plate bolted to the ground in the forecourt adjacent to the footpath to Lakemba Street. It is separated from the footpath by a raised and painted kerb. It is not part of a building. I do not consider the defendant’s failure to remove the steel threads is a breach of clause 11.3.1 of the lease.

Specific Performance

127 The plaintiff seeks an order that the defendant register the lease. The defendant has made no attempt to register the lease. This failure is a breach of the lease. For the reasons in paragraph 34 the plaintiff is not entitled to an order in those terms. The Registrar-General may refuse to register the lease and the defendant may be unable to obtain the necessary consent to a new plan of subdivision. However, the defendant is required to do all that is necessary on its part to be done to register the lease, including, if necessary, preparing a plan of subdivision and doing all that may be necessary on its part to be done to register any such plan of sub-division.

Outstanding Issues

128 There remain three issues in respect of which the plaintiff seeks relief, namely, its payment of electricity, the water/oil separator and the allegedly leaking roof. Those issues have been stood over until after the determination of the other issues.

Relief

129 The plaintiff is entitled to a declaration that the property leased to the plaintiff includes all areas within the boundary of the service station premises, except for the workshop, mobile phone shop and the common toilets. It is entitled also to an order requiring the defendant to take all necessary steps which are required to be performed by it to enable the lease to be registered. It is entitled to a declaration that the defendant is not entitled to terminate the lease by reason of any of the breaches alleged in the notice of breach of covenant dated 16 August 2004 or the letters from Maatouk’s Legal Group to the plaintiff dated 17 and 20 August 2004. On making these declarations, the existing injunctions should be dissolved. The defendant’s cross-claim should be dismissed.

130 In the course of these reasons I have found that both parties have breached the lease in various respects. However, neither party has established that it has suffered any damage as a result of the breaches. I see no utility in making declarations about the breaches that have occurred. Neither party is entitled to any substantive relief consequent upon those findings, although each party would be entitled to nominal damages in respect of the breaches of lease by the other. As the nominal damages would be set off, I decline to order that nominal damages be paid.

131 I direct the plaintiff’s counsel to bring in short minutes of order in accordance with these reasons. The proceedings will be stood over to a convenient date next week for the making of orders to give effect to these reasons, to hear argument on costs and to give directions for the trial of the remaining issues.

Future Conduct of the Proceedings

132 The hearing of these proceedings was expedited. The litigation has largely been brought about by the unreasonable and provocative conduct of both parties. The defendant and Mr Peter Maatouk have been principally to blame. Had the defendant agreed to a mediation, as the plaintiff suggested, their differences might have been resolved, although this would have involved an application of common sense which has been noticeably absent. There is no reason the resolution of other litigants’ disputes should be delayed to give further priority to this one. The parties are not entitled to any further expedition.

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CITATION:	ET Petroleum Holdings P/L v Clarenden P/L [2005] NSWSC 435
HEARING DATE(S):	04-07/04/05, 19/04/05
JUDGMENT DATE :	5 May 2005
JUDGMENT OF:	White J
DECISION:	Plaintiff's counsel to bring in short minutes of order in accordance with reasons.

CATCHWORDS:	LANDLORD AND TENANT - Construction of lease - Identification of leased area - Purported termination following s 129 notice - Alleged breaches discussed and ruled on - No question of principle.
LEGISLATION CITED:	Conveyancing Act 1919 (NSW) Real Property Act 1900 (NSW) Dangerous Goods Act 1975 (NSW)
CASES CITED:	Sinclair-Lockhart's Trustees v Central Land Board (1950) 1 P & C R 195 Cole v The West London and Crystal Palace Railway Company (1859) 27 Beav 242; 54 E.R. 96; Hewson v The London and South Western Railway Co. (1860) 8 W.R 467 Steele v Midland Railway Co. (1866) L.R. 1 Ch App 275 Woodfall's Landlord and Tenant, para 5.023 Hayes v Gunbola Pty Ltd (1986) 4 BPR 9247 R v Paulson [1921] 1 AC 271 Finley v Russell-Jones (1948) 49 SR (NSW) 96
PARTIES:	ET Petroleum Holdings Pty Limited v Clarenden Pty Limited
FILE NUMBER(S):	SC 4719/04
COUNSEL:	Plaintiff: SA Wells Defendant: A Radojev
SOLICITORS:	Plaintiff: Conomos & Spinak Lawyers Defendant: Maatouks Law Group