Fallon Street Properties Pty Ltd v Steel & Stuff Pty Ltd

Fallon Street Properties Pty Ltd (the appellant) and Steel & Stuff Pty Ltd (the respondent) were parties to a lease agreement concerning land with a partly completed development, under which a reduced rent was payable. The dispute centred on whether the lease contained an implied term that the landlord was obliged to complete the building in accordance with the interim occupation certificate issued under the *Environmental Planning and Assessment Act 1979* (NSW) within a reasonable time. The respondent also sought damages for relocation costs to new premises, raising questions about the reasonableness of these costs in relation to the costs of completing the building and whether the period for additional rent should extend beyond the termination date of the existing lease. The matter was heard in the Court of Appeal of New South Wales.

The primary legal issues before the court were: first, whether an implied term existed in the lease obliging the landlord to complete the building in accordance with the interim occupation certificate within a reasonable time; and second, concerning the assessment of damages, whether the cost of relocation was so far in excess of the costs for completing the building as to be unreasonable compensation, and whether the period for claiming additional rent should be limited to the date of termination of the existing lease.

The court considered the principles of implied terms in contracts, particularly in the context of leases for partly completed developments. It reasoned that the nature of the agreement and the circumstances surrounding its formation supported the implication of a term requiring the landlord to complete the building to a stage where it could be occupied in accordance with the interim occupation certificate within a reasonable time. Regarding damages, the court assessed the reasonableness of the relocation costs, balancing them against the landlord's breach and the respondent's losses. The court also determined the appropriate period for which additional rent could be claimed, aligning it with the period of the respondent's loss.

The Court of Appeal allowed the appeal in part, setting aside an earlier order and entering judgment for the respondent in the sum of $342,824. The appeal was otherwise dismissed, and the appellant was ordered to pay the respondent's costs of the appeal. The respondent was also granted a certificate under the *Suitors' Fund Act 1951* (NSW) in respect of the unsuccessful part of the appeal, subject to eligibility.