Fedeli and Santopadre v Alex Constructions Pty Ltd - [2016] NSWCATCD 34

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation: Fedeli and Santopadre v Alex Constructions Pty Ltd [2016] NSWCATCD 34
Hearing dates: 2, 3 March, 14 May, 15 June 2015
Decision date: 04 March 2016
Jurisdiction: Consumer and Commercial Division
Before: D Bluth, Senior Member
Decision:
1. The option to renew was exercised in accordance with the terms of the Lease.

2. The Applicants are entitled to the option to renew the Lease notwithstanding the s133E Notice.

3. The Applicants are entitled to the option to renew the Lease notwithstanding a breach of clause 4.2.2.

4. Any costs application pursuant to section 60 of the Civil and Administrative Tribunal Act 2013 or Rule 38 of the Civil and Administrative Tribunal Rule 2014 must be lodged in the Tribunal and served on the costs respondent within 21 days of the date of this order either attaching or referring to the documents relied upon in support of the application.
5. The costs respondent will have 21 days after the date of receipt of the costs application referred to above, to lodge in the Tribunal and serve on the costs applicant the submissions, if any, in response to the costs application, such submissions either attaching or referring to the documents relied upon.
6. The cost applicant will have 14 days after the date of receipt of the cost respondent's submissions to lodge in the Tribunal and serve on the costs respondent the submissions, if any, in reply, such submissions either attaching or referring to the documents relied upon.
7. The Tribunal will determine any costs application on the basis of the papers lodged in the Tribunal.
Catchwords: Clause 4 of the Law Society Commercial Lease, exercise of option to renew by a solicitor, solicitor's authority to issue and receive notices under the Lease and the Conveyancing Act, validity of s133E Notice under the Conveyancing Act and the doctrine of approbation and reprobation
Legislation Cited: Conveyancing Act 1919
Retail Leases Act, 1994
Cases Cited:
C & P Syndicate Pty Ltd v Reading [2013] NSW SC 43

Comdox v Robins (2009) NSWSC 367

Cronulla Newsagency Pty Ltd v Piazzala [2002] NSWADT 121

Gilbert J McCaul (Aust) Pty Ltd v The Pitt Club Ltd (1957) 59 SR (NSW) 122

Kavia Holdings Pty Ltd v Bellavista Pty Ltd (2006) NSW SC 633

Kazas & Associates Pty Ltd v Multiplex (Mountain Street) Pty Ltd 2003 [NSW] SC840

Kent v Hogarth (1995) QCA 472

Lo Guidice v Bivano (No 2) (1962) VR 429

Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (2010) NSWCA 268

Mineaplenty Pty Ltd v Trek 31 Pty Ltd (2006) NSWSC 1203

Nameless Shamelss and Legless Pty Ltd v 2 Roslyn Street Pty Limited (2004) NSWSC 519

New South Wales Netball Association Ltd v Probuild Constructions (Aust) Pty Ltd VC 2015 08874

Ong v Luong (1991) 9 BPR 16, 759

Prudential Assurance Co Ltd v Helth Minders Pty Ltd (1967) 9 NSWLR

Rilfang v L Pty Ltd (2002) 11 VPR 20, 281

Steak Plains Olive Farm Pty Ltd v Australian Executor Trustee Limited [2015] NSWSC 289

Subway Realty Pty Ltd v The Investment 1 Pty Ltd (2010) NSWADT 123

Sydney West Area Health Service v Staracek (2008) NSWSC 744 [16]

Young v Lamb (2001) NSWCA 225

Wheeldon v Burrows (1879) 12Ch D31

Wilcox v Richardson (1997) 43 NSW LR 4
Zhang v VP302SPV (2009) NSWCA 73
Texts Cited: Bowstead & Reynolds on Agency 16th Ed
Halsbury's Laws of England
Land Law by Peter Butt, 5th ed. Law Book Company
Category: Principal judgment
Parties: Gabriella Fedeli and Domenico Santopadre (Applicant)
Alex Constructions Pty Ltd (Respondent)
Representation:
Solicitors: Giles Payne & Co (Applicant)
ALC Lawyers (Respondent)
Counsel: Mr Ben Zipser (Applicant)
Mr J Hallion (Respondent)

File Number(s): COM 14/00308
Publication restriction: Nil

Reasons for Decision

This dispute between a lessor and lessees has run for over two years, involved four hearing days and very lengthy submissions from both parties of nearly 200 paragraphs each and regards a view of the courtyard, which is the subject of the dispute in the Tribunal with the parties and their legal representatives.
An indication of what this dispute is about can be found in the closing written submissions in chief on behalf of the lessees, as applicant (at paragraph 134):

In summary, in circumstances where the Lessor's development requires four large garbage bins to be relocated to a part of the land leased under the 2008 Lease which the Lessees currently use to store other plant and equipment, the Lessor's evidence does not establish, with sufficient reliability, the places to which the other plant and equipment and goods can be relocated.

Whilst the above may be a fair summation of the ultimate dispute between the parties, nevertheless during the course of this dispute the parties have traversed some of the most complex legal issues relating to the exercise of an option to renew a lease and the validity of notices issued under the Conveyancing Act 1919 (the Conveyancing Act).

History of the restaurant called II Baretto

Alex Constructions Pty Ltd (Lessor) is the owner of the property situated at [*****] Surry Hills which comprises a ground floor shop, an upstairs office occupied by the Lessor and a residential flat separately tenanted (the building) together with a small courtyard and a garage at the rear. The Lessor also owns the neighbouring property [*****] Surry Hills which also has a small courtyard and garage at the rear.
The Lessor granted to Gabriella Fedeli and Domenico Santopadre (Lessees) a lease commencing 1 November 2008 in respect of Lot 1 DP783010 (part) being lock-up shop situate on the ground floor at [*****] Surry Hills and expiring on 31 October 2013, registered number AF848566P (the Lease). This is the description of the premises asserted by the Lessor.
In contrast, the Lessees assert the premises are described as follows:

The 2008 Lease describes the land as Lot 1 DP783010 (part) being lock-up shop situated on ground floor [******] Surry Hills known as 'Il Baretto'.

The words known as Il Baretto appear to have been inserted by hand on the registered copy of the Lease but not on the file copy held by the Lessor which is a duplicate of the registration copy. The only other significant change to the registered copy of the Lease is the insertion by hand against the Lessee on the front page where tenancy appears the following words 'Tenants in common in equal shares'. Herein lies one of the problems with the conduct of this dispute between the parties that there was no agreement, even on the most basic facts, regarding for example what is the subject matter of the Lease, namely the actual premises leased.
Ms Fedeli and her previous business partner Ms Rosita Caro had been conducting the business of the restaurant Il Baretto in the ground floor of the building since 1999. The lease in 1999 described the land leased as:

ground floor shop and rear garden [****] Surry Hills.

The description of the premises changed in 2001 in the next lease with the omission of reference to the garden area. The garden area was also omitted in the description of the premises in the 2003 lease.
As transpired from the evidence, the rear garden or courtyard, as it has become as there appears to no longer be any garden, had been used and is used by the Lessees and their employees and service of customers for recreation, smoking, sometimes entertaining staff and customers on tables and chairs, access to the toilets, storage of restaurant equipment and the delivery of goods. The other occupiers of the building also had access to the courtyard and facilities such as the toilets. The extent of the use by the Lessees of these areas and facilities and its legal significance was the basis of the dispute between the parties.
During 2004 Ms Caro wished to exit the business and Ms Fedeli took over the business. Later Ms Fedeli brought into the business the co-applicant Mr Domenico Santopadre. The 2003 lease was assigned to Ms Fedeli in 2004 and a deed of assignment was entered into with the Lessor on 1 November 2004. At the time of the assignment, the Lessor through its director Mr Milan Novkovic (also known as Alex) indicated that the Lessor proposed building work on the double garage built across the rear of the two properties. Ms Fedeli acknowledged this proposed change to the property in the deed of assignment.
The Lessor's plans for the works on the double garage did not proceed but instead the Lessor sought to redevelop the rear of the two properties [*****] Surry Hills, by constructing on the double garage and the courtyards of both properties a substantial residential and commercial building. A development application was lodged with the Sydney City Council. The Lessees became concerned as to the likely effect on the business of Il Baretto if another commercial building was built on the rear yard, particularly if it was to be leased as a restaurant.
The proposed development by the Lessor over the courtyard will as the plans show involve a reconfiguration of the areas at the rear of [*****} Surry Hills and change access by the Lessees to the toilets and to any storage area available to be used. There are also some changes proposed to the configuration of the area for the garbage bins of the Lessees. Ultimately there will be a much reduced courtyard, if any, between the end of the building and the new proposed building.
The parties entered into extensive negotiations concerning the proposed development and a proposed new lease. The Lessees instructed Mr Joe Gilles of Giles Payne & Co (GPC) to act. Mr Gilles wrote directly to the Lessor on 4 October 2012 and said in part:

We act for the Lessees… Our clients have instructed us that you recently advised them that you intend to resume part of the leased premises for the purpose of development.
(Our clients) are…labouring under the misapprehension that you have some rights in respect of the courtyard and toilets. Based upon that misapprehension they were seeking to deal with you in respect of those rights. We have advised our client that, upon the basis of the instructions we have from her to date, you have no possession rights in respect of the courtyard and/or toilets which you are now proposing to redevelop…

That letter was answered by the Lessor on 11 October 2012 advising that the agent Mr Momitsas from CJM Property Group would contact the Lessees to further inform them about any future development. Subsequently the matter was placed by the Lessor in the hands of its lawyer Ms Alison Cordwell of ALC Lawyers (ALC) and correspondence ensued between the lawyers on the proposed development and also in relation to alleged breaches of the Lease by the Lessees.
Subsequently the Lessees arranged for their solicitor Mr Gilles to send a letter exercising the option to renew the Lease. Mr Gilles wrote directly to the Lessor on 3 May 2013 the following:

As you know we act for the abovenamed Lessees. Pursuant to the terms of the lease registered number AF848566P dated 21 April 2009 and commencing on 1 November 2008 our clients exercise their option to renew their lease.
Would you please submit a new lease in due course, for the period commencing the day after the expiry of the existing lease and consistent with the terms of the existing lease.

This letter was sent to the business address of the Lessor and the residential address of the director, Mr Novkovic. However, significantly, the notice of exercise was signed by Mr Gilles himself and not by the Lessees personally.
Mr Gilles also wrote on 3 May the following letter to the Lessor’s solicitor Ms Cordwell which was sent by email on 6 May 2013:

We refer to your email of 29 April 2013.
We sought our client's instructions. They have advised us that the use of the courtyard to which they have accustomed to date has been well known to the Landlord whose office is upstairs.
The table and chairs in the courtyard are used mainly for smokers when they leave the restaurant for the purpose of smoking a cigarette.
They have used it for dining, but only occasionally, and our instructions are that this was the use to which the courtyard was previously put by the previous owners of the restaurant.
Our clients have merely some extent to continued that use.
Notwithstanding the above, we have told our clients that they are to immediately cease the use of the courtyard for the purpose of providing meals to patrons.
They have agreed to do so, effective immediately.
We can see no reason to immediately remove the tables and chairs from the courtyard, so long as they are there specifically for the purpose of seating smokers.
As advised above, our clients will no longer serve patrons in the courtyard.
In particular we require your clients' undertaking that they will not attempt to commence any construction which might involve the use of the courtyard, toilets, storage area or other area previously used by our client pursuant to their lease.
…
We enclose with this letter a copy of notice of exercise of option under the lease sent directly to your client's registered office and to his business address.

Upon receipt of the notice of exercise of the option to renew, the Lessor instructed its solicitor Ms Cordwell to issue a notice pursuant to s133E of the Conveyancing Act (s133E Notice) relying on breaches of the Lease by the Lessees to deny the Lessees the ability to exercise the option to renew the Lease. Also, significantly, that notice was signed by Ms Cordwell herself and not by the Lessor. Mr Gilles responded to the s133E Notice by letter on 27 May 2013 seeking particulars of the alleged breaches. However, Mr Gilles raised no objection to the execution of the s133E Notice by Ms Cordwell and not by the Lessor. However, Mr Gilles did observe that Ms Cordwell "wrote to our clients directly instead of to us."
Ms Cordwell responded by letter dated 30 May 2013 as follows:

Thank you for your letter dated 27 May 2013 and the concerns you raise in respect of the statutory notice served on the lessee.
We assure you that in the service of the statutory notice on the lessee, no professional discourtesy was intended and we apologise if any was taken.
Given the statutory requirements under the Conveyancing Act 1919 and the service provisions under the lease that the parties had agreed to, it would have been remiss of us to have effected service in any other manner.
In this regard we note your letter of 3 May 2013 purporting to exercise the option under clause 4.4 of the lease was forwarded directly to the lessor.
Inadvertently, a copy was not forwarded to your firm at the time of service and we enclose now a copy for your information.
In any event, in effecting the statutory notice as the lessor was obliged under the Act and the lease, you will note that there was no invitation to your clients to respond to us directly.
We trust this satisfactorily addresses any concerns your client may have.

Ms Cordwell subsequently wrote to GPC requesting that the Lessees pay future rent into a new bank account of the Lessor. Ms Paula Becker of GPC on 31 January 2014 wrote back to Ms Cordwell asserting that the Lease did not allow for an agent, such as a solicitor, to issue a notice under the Lease, such as a direction, and such direction could only be signed by the Lessor personally.
On 19 December 2014 the Lessees filed under COM 14/00308 an Application for Original Decision and the orders sought in that application were subsequently refined by Senior Member Mulane at a Directions Hearing on 17 April 2014 as follows:

a declaration that the option to renew the lease was validly exercised;

an order that the Lessor enter into the renewed lease; and

a declaration that the leased property includes the adjacent courtyard.

The hearing took place over a number of days on 2 and 3 March, 14 May and 15 June 2015. There was a view of the property including the courtyard and the neighbouring property [*****] Surry Hills. At the end of the hearing, written submissions were provided by counsel. Further submissions were called for in September 2015 and were filed with the Tribunal in November 2015.
Evidence for the Lessees was provided by Ms Gabriella Fedeli, one of the Lessees and by two of the employees, Mr Karl Muzica and Mr Dirk Bischoff and also by Ms Becker and Mr Gilles of GPC. Further, Ms Fedeli and Mr Gilles were cross-examined on their evidence. Evidence for the Lessor was provided by Mr Novkovic, the director, who was also cross-examined. The Lessor also obtained evidence from the agent, Mr Momitsas, the Lessor's bookkeeper and accounts clerk and from Ms Cordwell of ALC. A former tenant of the Lessor in the residential apartment, Mr Stormy Jack Waterford, gave a statement and then attended court to be cross examined. Notably Mr Domenico Santopadre the co-applicant and co-Lessee did not provide any evidence but appeared to allow the running of the matter and all evidence from the Lessees’ point of view to be provided by his co-applicant Ms Fedeli.
The Lessees were represented by Mr Ben Zipser of Counsel and the Lessor was represented by Mr Joseph Hallion of Counsel.

The Lessor's contentions

The Lessor contends the following:

the option to renew was not exercised in accordance with the terms of the Lease;

if the option was validly exercised then pursuant to the notice issued under S133E the Lessees’ rights to exercise the option were extinguished under s133E (4)(c) because no order for relief against the effect of the s133E Notice was sought from a court within one month of service of the notice; and

the relevant court is the Supreme Court not the Tribunal.

The Lessees' contentions

The Lessees contend the following:

the option to renew was exercised in accordance with the terms of the Lease;

the s133E Notice is not a valid notice because:

it was not served within the required time of 14 days of the giving of the notice of exercise of option by the Lessees; and

the form of the notice, being its content, does not comply with the requirements under s133E;

if the s133E Notice is found to be valid then there were no relevant breaches or the breach or breaches were de minimus, and

the Tribunal is a relevant court for these issues to be ventilated, not necessarily the Supreme Court.

The exercise of the option

The Lease was on the terms of the Law Society commercial lease. Clause 4.4 of the Lease states as follows:

4.4   The tenant can exercise the option only if:
4.4.1    the tenant serves on the landlord a notice of exercise of option not earlier than the first day stated in item 11D of the schedule and not later than the last day stated in item 11E of the schedule;
4.4.2   there is at the time of service no rent or outgoings that is overdue for payment; and
4.4.3    at the time of service all the other obligations of the tenant have been complied with or fully remedied in accordance with the terms of any notice to remedy given by the landlord;

Mr Hallion on behalf of the Lessor contends that the Lessees failed to exercise the option in accordance with the terms of the Lease. The notice of exercise of option was sent on 3 May 2013 by the Lessees' lawyers, GPC. The notice was signed by Mr Gilles and not by the Lessees themselves. The notice was sent to the Lessor's registered office and to the residential address of the director, Mr Novkovic.
The Lessor now challenges the exercise of the option to renew on the basis that the notice of exercise was signed by Mr Gilles and not by the Lessees themselves. Mr Hallion points to the Lease and asks where is the authority for an agent of the Lessees, such as the lawyer, to sign the notice of exercise of option? This is the first question for the Tribunal.

Submissions by the Lessor on the authority of a lawyer to sign the notice of exercise of option

Mr Hallion on behalf of the Lessor made the following submissions:

The parties to the Lease are nominated as Alex Constructions Pty Ltd as Lessor and Gabriella Fedeli and Domenico Santopadre as Lessees. These are the parties to the Lease pursuant to clause 2 of the Lease.

Under clause 4 of the Lease (which is set out in paragraph 27 of these Reasons) the clause is quite specific that the tenant serves on the landlord a notice of exercise of option.

Clause 14 of the Lease states:

Clause 14    Exclusions, Notices and Special Clauses
…
14.2   A document under or relating to this lease is-
14.2.1 served if it is served in any manner provided in section 170 of the Conveyancing Act 1919; and
14.2.2   served on the tenant if it is left at the property.

Mr Hallion refers to the decision of White J in Zhang v VP302SPV (2009) NSWCA 73 where His Honour reviewed a number of authorities in respect of the proposition that a solicitor has no ostensible authority to bind his client to an ordinary contract and the actual authority of the solicitor to contract on behalf of his or her client for the sale or purchase of land must be conferred expressly or by necessary implication.

In Zhang, White J extracted at [34] the relevant principle stated in Bowstead & Reynolds on Agency, 16th Ed, Article 74 as follows:

Where a person, by words or conduct, represents or permits it to be represented that another person has authority to act on his behalf, he is bound by the acts of that other person with respect to anyone dealing with him as an agent on the faith of any such representation, to the same extent as if such other person had the authority that he was represented to have, even though he had no such actual authority.

Mr Hallion then refers to a decision of Bryson J in Comdox v Robins (2009) NSWSC 367 at [23] where His Honour held:

As much case law shows, if particular means for exercising an option are intended to be essential for effective exercise, compliance of the prescribed means is necessary if the stated contractual relationship is to result. It does not matter whether observing the prescribed means is objectively important: what matters is whether the words used show that they were intended to be essential.

Mr Hallion further submits that the language of the Lease is clear that the Lessees can exercise the option 'only if the tenant serves on the landlord'. The option clause does not use 'may' to support a construction that is facultative. The Lease is silent on the use of agents by the parties. Accordingly, construction of the Lease requiring service on the Lessor and a strict adherence to what the parties agreed avoids the contingency and uncertainty in respect of the exercise of the option.

Mr Hallion points to the evidence of Mr Gilles' authority being from his affidavit that he says he was instructed by the Applicant in August 2012 and that:

Since that date I have been corresponding with the Respondent (the Lessor) directly and to the Respondent through its solicitors, Alison Cordwell.

Mr Hallion submits that what Mr Gilles was instructed to do and whether that extended to the exercise of the option is a matter of speculation and possible inference only. However, any inference to be drawn or implication from the correspondence between the lawyers was rebutted by Ms Fedeli's evidence of which she confirmed in cross-examination, that under the Lease, she would only treat a notice signed by the Lessor as valid notice because, consistent with the legal advice provided by Ms Becker in January 2014 to her and confirmed by Ms Becker to Ms Cordwell that the Lease did not provide for 'nominees or agents'.

Submission by the Lessees on the authority of a lawyer to sign the notice of exercise of option

Mr Zipser on behalf of the Lessees made the following submissions on this matter in two aspects, firstly, that the serving of the notice by somebody other than a tenant, such as an agent, is permissible and secondly, the actual execution of the notice of exercise of the option also by an agent, such as a solicitor, is permissible:

The Lease does not expressly provide that the tenant personally (in contrast to an agent) must serve the notice of exercise of option on a landlord. In the absence of such an express restriction, such restriction should not be implied into clause 4.4.1 of the Lease because:

The restriction (that only the tenant personally can serve the notice of exercise of option) does not satisfy the rules for implications of terms into a contract (see Codelfa Constructions Pty Ltd v SRA (1982) 149CLR 337).

To the contrary, the restriction would create great inconvenience on tenants if the tenant could not engage an agent to prepare and serve the notice. For example, tenants often engage solicitors to deal with landlords. It would cause great inconvenience if the solicitor, although able to communicate with the landlord on other issues, could not prepare or serve the notice of exercise of option. Another situation, by way of example, is where a tenant engages a courier to deliver a notice of exercise of option to a landlord. The courier is an agent of the tenant. On the Lessor's construction of clause 4.4.1, delivery of a notice of exercise of option by the courier would cause a notice to be invalid.

Further, there is no rational or commercial reason for implying such a restriction to clause 4.4.1.

Clause 14.2.1 of the Lease is facultative in the sense that it expands the situations in which a document can be served (see Riltang v L Pty Ltd (2002) 11 VPR 20, 281 at [17]). Clause 14.2.1 does not in fact place a restriction on the identity of a person who can serve a notice under s170 of the Conveyancing Act.

In Mineaplenty Pty Ltd v Trek 31 Pty Ltd (2006) NSWSC 1203 Brereton J held:

Notice of exercise of an option may be given by and to the duly authorised agents of the Lessee and the Lessor.

This case clearly supports the construction of clause 4.4.1 that a solicitor engaged by a tenant can prepare and serve a notice of exercise of an option on behalf of a tenant.

The Lessor's submission is based primarily on the advice of Ms Becker of GPC, when she asserted that only the parties to the Lease themselves could give notice under the Lease, there being no provision for a nominee or agent.
However Mr Gilles in his affidavit dated 20 December 2013 states:

I am the solicitor for the Applicant. I was instructed by the Applicant in August 2012. Since that date I have been corresponding with the Respondent directly and to the Respondent through its solicitor.

Accordingly, from this statement it is clear that Mr Gilles had the authority from the Lessees in relation to all dealings with the Lessor concerning the Lease.

A letter from Mr Gilles to the Lessor dated 4 October 2012 commenced, We act for the Lessees in the above premises. A second letter was sent on 4 March 2013 which commenced, We act for Gabriella Fedeli and Domenico Santopadre who are the Lessees of the abovementioned premises. Finally, there are multiple letters from Mr Gilles to the Lessor, its agent and its lawyer describing the Lessees as 'our clients'.
Ms Fedeli gave the following evidence in paragraph 51 of her affidavit dated 19 December 2013:

On 3 May 2013 my solicitor sent a notice of exercise of option under the registered Lease.

There are letters from the Lessor's solicitors, ALC, to Mr Gilles dated 2 April 2013 and 5 April 2013 in which the former described the Lessees as the 'clients of Mr Gilles'.

An opinion expressed by one lawyer to another lawyer in January 2014 regarding the authority of the solicitor for the Lessor to issue a direction under the Lease, rather than the Lessor personally is just an opinion on that particular aspect and should not have any bearing on the question of the exercise of the option to renew the Lease signed by Mr Gilles.

Finally, Mr Zipser says it is surprising for the Lessor to raise for the first time in closing submissions to the proceedings a challenge to the authority of Mr Gilles to sign the notice of exercise of option. The raising of such an issue so late in the proceedings has prejudiced the Lessees and consequently the Lessor should not be allowed to now question the validity of the exercise of the option.

The Tribunal's view on the exercise of option to renew the Lease

Section 72 of the Retail Leases Act 1994 (RLA) states:

72.   Section 72 ‑ Powers of Tribunal relating to Retail Tenancy Claims
(1)   In proceedings for a retail tenancy claim lodged with the Tribunal under this part, the Tribunal is empowered to make any one or more of the following orders that it considers appropriate:
(f)   An order:
(iii)   declaring the rights and liabilities of parties under law, whether any consequential relief is or could be claimed or not, …

The Tribunal notes that the Lessor, upon receipt of the signed exercise of option, instructed Ms Cordwell to issue the s133E Notice, presumably for the effect of giving notice to the Lessees of the alleged breaches of Lease in the notice and that unless the Lessees took the appropriate action under s133F of the Conveyancing Act the Lessor would treat the breaches as precluding the Lessees from exercising the option. That notice was actually signed by Ms Cordwell, solicitor for the Lessor, and was not executed by the Lessor itself.
There is no legislative empowerment that I could find in the Conveyancing Act, to allow a solicitor to sign a notice prescribed by the Conveyancing Act such as a s133E notice. For the same reasons as asserted by Mr Hallion on behalf the Lessor regarding the notice of exercise of option that there is no specific right under the Lease for an agent, such as a solicitor, to sign notices of behalf of the Lessor, there is also no specific right for a solicitor to execute notices issued under the Conveyancing Act on behalf of a lessor.
Many issues were raised by both Counsel in their submissions regarding the authority for lawyers to act, including whether the communications were privileged between client and solicitor, what was the actual authority of Mr Gilles, what was he instructed to do or not to do, what did Ms Fedeli mean when she referred to the authority of Mr Gilles in her evidence and cross-examination, and what was she advised by Ms Becker to do about receipt of a direction in the form of a notice from Ms Cordwell on behalf of the Lessor. Further, relevant witnesses were not cross-examined specifically on these issues, partly because of the lateness in the hearing when the issue of the validity of the exercise of the option was raised on behalf of the Lessor in the conduct of the case. Both sides then sought to draw Jones v Dunkel inferences that although witnesses were called and cross examined, certain questions were not put to those witnesses relating to the matters that are now canvassed and that inferences should be drawn as to what those witnesses would have said if those questions had been put to them.
Whilst I have some sympathy for the position of the Lessees that the raising of this issue of the authority to sign the exercise of option to renew the Lease within the closing submissions at the end of the lengthy hearing, that is to say it comes very late in the proceedings, should on the submission of the Lessees therefore be rejected, nevertheless the Tribunal views that this is a very important issue to be determined between the parties. However, its resolution is not easy given the current state of authorities and the specific terms of the Lease and the circumstances of this matter.
The first starting point for the Tribunal is that I am satisfied that Mr Gilles had the requisite authority from the Lessees when he signed the notice of exercise of option as that is exactly what the Lessees’ desired and they have not wavered from this position. So there can be no question of Mr Gilles going outside of his instructions or authority to act.
Mr Hallion relied on the decision of White J in Zhang to assert that Mr Gilles was not authorised. The issue in Zhang was whether the lawyer had ostensible authority to commit the parties to a concluded agreement. The former clients of the solicitor, being the purchasers, sought to resile from the subsequent amendments made by the solicitor without, apparently, their authority. This case and other cases such as Pianta v National Firemen & Trustees Pty Ltd (1964) 180 CLR 146 also relied upon by Mr Hallion, are concerned with the authority of a solicitor to commit the clients to a binding and concluded contract and whether that authority of the solicitor was ostensible or actual in the circumstances, when that authority is now subsequently questioned by the former clients of the solicitor, who no longer seek to be bound by their solicitor's actions in relation to the concluded agreement.
As I have indicated, this is not the situation here. Rather, it is a question of whether the executed notice of exercise of option by Mr Gilles is a proper exercise and results in a binding agreement pursuant to clause 4.1 of the Lease. As I have said, I am satisfied that Mr Gilles had the requisite authority to commit his clients, the Lessees, to an exercise of the option to renew.
The next issue is whether the actual notice is to be served personally by the Lessees. The Tribunal finds the construction of clause 4.1 of the Lease by Mr Hallion on behalf of the Lessor, that the Lessees must serve the notice personally and not through an agent because there is no entitlement to do so in the Lease, as too restrictive in the context of actual physical service. Surely if the notice of exercise of option is served by a courier and not in the post or by personal service by the Lessees it is still served within the terms of the Lease and would be valid service and be regarded as a proper exercise of the option to renew.
In relation to whether the execution by Mr Gilles of the notice to exercise the option has the effect of creating the binding agreement pursuant to clause 4.1, the Tribunal finds it instructive that the parties have corresponded through their lawyers for some time before Mr Gilles was instructed to exercise the option. Irrespective of the precise nature of the correspondence, the correspondence was clearly about the Lease between the parties including references to the alleged breaches, the proposed development on the property and a proposed new lease between the parties.
Why clients seek to use lawyers is explained by Pincus JA in Kent v Hogarth (1995) QCA 472 as follows:

A reason why people use solicitors in business transactions is to ensure that their dealings will be properly documented: One would not usually expect a solicitor, engaged in relation to a prospective contract, to have authority to contract orally, creating a situation fraught with the risk of dispute about the content and indeed the existence of the contract, a risk the avoidance of which is one of the purposes of engaging a solicitor.

The respective solicitors did not as far as the Tribunal is aware, communicate orally but reduced their communication to writing (as demonstrated by the voluminous evidence produced in this dispute), no doubt for the reasons advanced by Pincus JA. Consequently, there was a course of conduct adopted by the Lessor and the Lessees to have their communications conducted through their respective lawyers. As can be seen, correspondence sent directly to the Lessor was subsequently answered on the Lessor's behalf by the Lessor's lawyer Ms Cordwell. This form of communication included, in the Tribunal's view, notices under the Lease and also notices under relevant legislation, such as the Conveyancing Act. It was a course of conduct followed by the Lessor, who immediately upon receipt of the written communication from Mr Gilles enclosing the signed notice of exercise of option by him did not object to the exercise on the basis that it was not signed by the Lessees personally. The Lessor instructed Ms Cordwell to issue the s133E Notice.
The Lessor's position is that the option was not properly exercised by the Lessees because it was signed by Mr Gilles and not the Lessees personally. The Lease contains no provision for agents to do the acts that the parties are required to do themselves under the Lease and consequently, the option to renew was not validly exercised. However, the Lessor seeks to rely on the s133E Notice if it is found by the Tribunal that the Lessees have exercised the option to renew to deny the Lessees the option because of the failure by the Lessees to institute the proceedings as required under the s133E Notice. The s133E Notice and the direction to pay rent into a new bank account were both signed by Ms Cordwell personally and not by the Lessor.
Stevenson J. in New South Wales Netball Association Ltd v Probuild Construction (Aust) Pty Ltd VC 2015 08874 held in relation to the principle of general law not to approbate and reprobate at [41-42]:

[41] In a passage cited with approval by the Full Court of the Federal Court of Australia in Acohs Pty Ltd v Ucorp Pty Ltd [2012] FCAFC 16 at [200] per Jacobson, Nicholas and Yates JJ, Browne-Wilkinson V-C put the matter this way in Express Newspapers plc v News (UK) Ltd (1990) 18 IPR 201 at 210:
There is a principle of law of general application that it is not possible to approbate and reprobate. That means you are not allowed to blow hot and cold in the attitude that you adopt. A man cannot adopt two inconsistent attitudes towards another: he must elect between them and, having elected to adopt one stance, cannot thereafter be permitted to go back and adopt an inconsistent stance.
[42] In Acohs, Jacobson, Nicholas and Yates JJ also referred with approval to the observations of McClure JA (as her Honour then was) in Mandurah Enterprises Pty Ltd v Western Australian Planning Commission [2008] WASCA 211. Her Honour at [109] and [110]:
There is authority in Australian law for an independent doctrine of approbation and reprobation: Commonwealth v Verwayen (1990) 170 CLF 394 at 421-422 per Brennan J; Fried v National Australia Bank Ltd [2000] FCA 910. The doctrine is summarised in Halsbury's Laws of Australia, Vol 190 [190-35] as follows:
A person may not "approbate and reprobate", meaning that a person, having a choice between two inconsistent courses of conduct and having chosen one, is treated as having made an election from which he or she cannot resile once he or she has taken some benefit from the chosen course.
In Halsbury's Laws of England, Vol 60 [962] the authors state:
Thus a claimant, having two inconsistent claims, who elects to abandon one and pursue the other may not, in general, afterwards choose to return to the former claim and sue on it; but this rule of election does not apply where the two claims are not inconsistent and the circumstances do not show an intention to abandon one of them.

Notwithstanding the earlier advice proffered to Ms Fedeli by Ms Becker on notices under the Lease, the Lessees clearly instructed Mr Gilles to exercise the option to renew the lease on their behalf. Mr Gilles signed the notice of exercise of option and sent it to the Lessor. Subsequently, he did not object to the execution of the s133E Notice by Ms Cordwell. However, the Lessor now objects to the execution by a solicitor, in effect as agent for the Lessee, in signing the notice of exercise of option. In these circumstances the Tribunal finds the Lessor is engaging in the conduct of approbating and reprobating. The Lessor having itself allowed its lawyer Ms Cordwell to sign the s133E Notice should not be allowed to object to the execution of the notice of exercise of option by Mr Gilles.
On reviewing the evidence, the Tribunal finds that the parties had adopted a course of conduct by way of business communication between their respective lawyers regarding the Lease, including the signing of notices. In adopting this course, the Tribunal finds that the Lessor waived the requirement under the Lease that the notice of exercise of option should be executed by the Lessees personally. This is consistent with the position that its own solicitor could sign notices under the Lease and did so in issuing the s133E Notice and the notice of redirection of rent.

The Validity of the s133E Notice

The submission by Mr Hallion on behalf of the Lessor noted at paragraph 25 of these Reasons, is that if the option was validly exercised, then the Lessor asserts that the Lessees forfeited the option because the Lessees failed to seek protection of the option by instituting proceedings under s133F of the Conveyancing Act in the Supreme Court. Mr Hallion also asserts that the Tribunal does not have jurisdiction to hear the Lessees' challenge to the s133E Notice as the Lessees should have commenced proceedings in the Supreme Court and now they have lost that opportunity.
The Lessees in turn make a number of contentions that the s133E Notice is not valid, that there were no breaches of the Lease and that the relevant Court for any contest on the validity can be the Tribunal and not just the Supreme Court.

The Conveyancing Act

Section 133E allows a breach of certain obligations not to preclude an option except in certain circumstances. The section states as follows:

133E(1)   This section applies to a lease that contains:
(a)    an option exercisable by the lessee, and
(b)    provision by which the lessee's entitlement to the option is made depend on performance of the lessee of any specified obligation, whether such performance is required before, or after, or before and after, the giving of any notice by which the option is exercised.
(2)   Despite any provision of the kind referred to in subsection (1)(b) no breach by the lessee of any relevant obligation precludes the lessee's entitlement to the option unless:
(a)   the prescribed notice has been served on the lessee in respect of the breach, and
(b)   the lessee's rights are extinguished in relation to the notice.
(3)   In subsection 2:
breach of an obligation includes, where the obligation requires anything to be done, any neglect or failure to do the thing concerned.
obligation includes any agreement, covenant, condition or stipulation by which the lessee is required to do or refrain from doing any thing.
prescribed notice means a notice in writing:
(a)   specifying the lessee's breach of the relevant obligation and served on the lessee:
(i)   within 14 days after the giving of a notice by which the option is exercised, if the breach occurred before the giving of that notice, or
(ii)   within 14 days after the breach, if the breach occurred after the giving of that notice, and
(b) stating that subject to any order of the court under section 133F, the lessor proposes to treat the breach as precluding the lessee from entitlement to the option.
(4)   For the purposes of sub section (2) (b), the lessee's rights are extinguished in relation to a prescribed notice:
(a)   if an order for relief against the effect of the breach in relation to the lessee's entitlement to the option is not sought from the court within one month after service of the prescribed notice, or
(b)   if proceedings in which such relief is sought are disposed of, in so far as they relate to that relief, otherwise than by creating the relief, or
(c)   if such relief is granted on terms to be complied with by the lessee before compliance by the lessor with the order granting relief, and the lessee fails to comply with those terms within the time stipulated by the court for the purpose.

Section 133F is the section where the court may grant relief from breach of certain obligations and states as follows:

133F(1) Relief referred to in section 133E may be sought:
(a)   in proceedings instituted in the court for the purpose; or
(b)   in proceedings in the court in which:
(i)   the existence of an alleged breach by the lessee of the lessee's obligations under the lease; or
(ii)   the effect of the breach from which relief is sought,
is in issue.
(2) The court may, in proceedings in which relief referred to in section 133E is sort:
(a)   make such orders (including orders affecting an assignee of the reversion) as it thinks fit for the purpose of granting the relief sought; or
(b)   refuse to grant the relief sought.
(3)   The court may, in proceedings referred to in subsection (2), take into consideration:
(a)   the nature of the breach complained of;
(b)   the extent to which, at the date of the institution of the proceedings, the lessor was prejudiced by the breach;
(c) the conduct of the lessor and the lessee, including conduct after the giving of the prescribed notice referred to in section 133E(2);
(d)   the rights of persons other than the lessor and the lessee;
(e)   the operation of section 133G; and
(f)   any other circumstances considered by the court to be relevant.

Section 133E Notice issued on behalf of the Lessor

Ms Cordwell by letter dated 21 May 2013 addressed to the Lessees issued the following notice:

Pursuant to Section 133E of the Conveyancing Act 1919 we herein give prescribed notice of the Lessee's breaches of relevant obligations of the Lease as follows:
1.   Contrary to clause 5.1.1 failing to pay rent in accordance with the obligations under the Lease and currently in arrears.
2.   Contrary to clause 5.1.2 failing to pay the Tenant's share of outgoings in a timely fashion.
3.   Contrary to clause 6.1 has conducted the business outside of the DA conditions of consent.
4.   Contrary to clause 6.1.2 conducting the business over extended hours contrary to Council approval
5.   Contrary to clause 6.1.3 the Tenants have failed to dispose of waste properly and including:
(a)   having used the adjacent property of 494 Bourke to store waste and otherwise in a manner inconsistent with the Lease;
(b)   regularly hosing in the courtyard and flushing of waste causing structural damage to the rear courtyard wall.
6.   Contrary to clause 6.1.1, 6.1.2, 6.1.4 and 6.3.2 using the property for private socialising contrary to the approved Council consent conditions and operating hours creating an annoyance to neighbouring property.
7.   Contrary to clause 6.1.4 the Tenants have conducted the Tenant's business contrary to the current DA.
8.   Contrary to clause 6.3.1 in conducting the Tenant's business contrary to the current DA the Tenant's conduct of the Tenant's business is likely to have prejudiced any indemnity of insurance policy in respect of the Lessor or in respect of the Lessor's liability to the public.
9.   Contrary to clause 6.3.2 use the property for an activity that has created a nuisance or annoyance to neighbouring properties consequential complaints to Council for breaches of Council approval.
10.   Contrary to clause 8.1 engaging in conduct that would prejudice and/or jeopardise the Tenant's insurance obligations.
In accordance with section 133E(3)(iii) subject to any order of the court under section 133F the Lessor proposes to treat these breaches as precluding the Lessee from exercising the option (s133E Notice).
Signed by Alison Cordwell, principal, ALC Legal, Solicitors (on ALC Legal Solicitors letterhead).

Jurisdiction of the Tribunal

The submission on behalf of the Lessor is that the Tribunal does not have jurisdiction to consider the validity of the s133E Notice. Mr Hallion asserted that the appropriate forum for the Lessees to take up issue with the validity of the s133E Notice and to seek the relief afforded to the Lessees under s133F of the Conveyancing Act is the Supreme Court of New South Wales and not this Tribunal. Mr Hallion says that reference to court in s133F is in fact the Supreme Court only. The second aspect of the submission is that the Lessees' rights were extinguished in relation to the option by the Lessees having not sought from the Supreme Court within the required one month after service of the s133E Notice the relief offered and it is now far too late in the day (some 18 months later) to raise these questions in the Tribunal.
Mr Zipser submits that in fact, the Tribunal has jurisdiction and refers to two decisions of the Administrative Decisions Tribunal (ADT) (the earlier Tribunal to this Tribunal) which supports the proposition that this Tribunal is an appropriate forum. Those decisions are Subway Realty Pty Ltd v The Investment 1 Pty Ltd (2010) NSWADT 123 at [23]-[27] where Judicial Member Fox rejected the proposition that the Tribunal had no jurisdiction to consider application of s133E of the Conveyancing Act. Judicial Member Fox stated:

That proposition seems to me to not need further consideration simply because s72(1)(f)(iii) of the RLA gives me power to make an order declaring the rights and liabilities of the parties under law…whatever restrictions there may be upon the jurisdiction of the Tribunal, it cannot simply disregard the plain strictures of law, especially when they impact on retail shop leases.

The second decision is that of Judicial Member Montgomery in Cronulla Newsagency Pty Ltd v Piazzata [2002] NSWADT 121 at [59]-[65].

Those two decisions were applicable to the ADT. However in relation to this Tribunal, the Tribunal notes the recent decision of White J in Steak Plains Olive Farm Pty Ltd v Australian Executor Trustees Limited [2015] NSWSC 289 where His Honour heard an appeal from the Appeal Panel in a case relating to a tenant seeking relief against forfeiture under the Agricultural Tenancies Act 1990. White J agreed with the Appeal Panel and the Principal Member Harrowell in the earlier decision, Australian Executor Trustees Ltd v Steak Plains Olive FarmPty Ltd [2014] NSWCATCD 143 that the Tribunal had jurisdiction. His Honour at [74]-[76] and [78] held:

74. It is true that equity's jurisdiction to grant relief against forfeiture is a jurisdiction the exercise of which requires a grant of positive remedies. At one time it was held that a Tenant that had been put out of possession could not in the same proceeding deny that he was in breach of the lease, or deny the Landlord's entitlement to determine the lease for the Tenant's breach, and at the same time seek relief against forfeiture. This was because a claim for relief against forfeiture only arises if the lease has been forfeited. It is now settled that a Tenant can raise such matters in the alternative, but that does not alter the fact that where equity relieves against forfeiture of the lease it grants positive remedies after a determination or concession that the lease has in fact been forfeited. The positive remedies may include an injunction restraining the Landlord from taking possession and an order for the grant of a new lease (although under s73 of the Supreme Court Act 1970 (NSW) the Supreme Court may give relief against forfeiture without the need for a new lease). The relief will be conditioned upon the Lessee remedying the breach.
75. In my view, irrespective of the extent of the Tribunal's power to grant statutory remedies, it has jurisdiction under s6 of the Law Reform (Law and Equity) Act and would be required to consider a defence to the owner's claim for possession that the Lessee was entitled to relief in equity against forfeiture. Section 6 was drafted so as to apply to all Courts, including those that did not have jurisdiction to grant equitable remedy. What is a "defence" for the purposes of s6 does not depend on the power of the Court in which the defence was raised to grant positive equitable relief. That that was the legislative intention appears clearly from the Minister's Second Reading Speech and the Report of the Law Reform Commission that led to the Act. Regard can be had to that extrinsic material in order to determine the meaning of the expression "…every grant of defence, equitable or legal…" where the expression is ambiguous (Interpretation Act 1987 (NSW) s34(1)(b)(i)).
76. Relief against forfeiture operates both as a positive claim and as a defence to the owner's claim for possession. The availability of the defence by way of relief against forfeiture is analogous to the availability of a defence to reclaim at law for possession that the Tenant is entitled to possession by way of specific performance of an agreement for lease. Section 6 and 7 of the Law Reform (Law and Equity) Act were drafted to permit such a defence to be raised in the inferior court even though the inferior court might not have jurisdiction to grant the appropriate equitable remedy to give effect to that defence, but could postpone the grant of relief to which the owner having the legal right to possession would otherwise have been entitled to permit the Lessee to obtain the appropriate remedies in a court of equitable jurisdiction so as to give effect to the equitable defence.
…
78. Accordingly, the Tribunal would have jurisdiction to determine the availability of a defence to the Landlord's claim for possession that the Tenant was entitled to relief against forfeiture even if its power to grant statutory remedies did not extend to granting appropriate relief to give effect to that determination. If an entitlement to relief against forfeiture was established, it should stay the proceeding to allow the Tenant to pursue appropriate relief in the Supreme Court.

The position of the Lessees is very similar to that of the tenant in Steak Plains Olive Farm seeking relief against forfeiture under the Agricultural Tenancies Act 1990. Accordingly, following that decision this Tribunal clearly has the power to consider a claim for relief against the forfeiture of an option under the Lease whether it be by the issue of the s133E Notice and the subsequent inaction of the recipient to institute proceedings as required under s 133F or whether the Lessees have not complied with the terms of the Lease, specifically clause 4.4.2 requiring the Lessees not to be in arrears at the time of the exercise of the option to renew.

Background of ss133E and 133F of the Conveyancing Act

As submitted by Mr Hallion, the beneficial nature of ss133E and 133F of the Conveyancing Act was introduced to address the harshness under the general law which arose out of the decision of Gilbert J McCaul (Aust) Pty Ltd v The Pitt Club Ltd (1957) 59 SR (NSW) 122 that the provisions in the lease for the exercise of an option to renew operated strictly that is, a tenant who had not complied with all the obligations under the lease would not have an enforceable claim to a renewable lease.
The New South Wales Law Reform Commission in its Report on Options and Leases (1967) referring to the decision in The Pitt Club found that:

Following the result of the judgment of the Full Court it would appear to be that a breach of covenant, however trivial and however long before the time of exercise of the option the breach may have occurred, prevents the exercise of the option although the lessor may have waived the breach so far as it concerns forfeiture of the original term.

As a consequence the Law Reform Commission recommended the introduction of the provisions which took the form of ss133E and 133F in the Conveyancing Act.
Bryson J in Sydney West Area Health Service v Staracek (2008) NSWSC 744 at [16] explained that section 133E and related sections should be understood as reforming legislation which overcame what was perceived as a mischief of excessive stringency in the law in the Pitt Club case. The terms of the reforming legislation are themselves stringent in their own way, although far less than the previous law.
As Mr Hallion points out, s133E applies to a lease where there is provision by which the Lessee's entitlement to the option is made to depend on performance by the Lessee of any specified obligation. Subsection (2) provides that where there has been a breach the lessor must serve a prescribed notice in respect of the breach and "a breach of an obligation includes, where the obligation requires anything to be done, any neglect or failure to do the thing concerned" and "obligation" includes "any agreement, covenant, condition or stipulation by which the lessee is required to do or refrain from doing anything" (s133E(3)).
Mr Hallion further submits that the specification of the relevant breach in a notice under s133E is concerned with identifying the very "act or obligation" arising under the Lease and stating that it has been breached. The notice does not require the Lessees to remedy the breach or make the notice regarding the forfeiture of the option contingent upon the Lessees remedying the breach in a reasonable amount of time before the Lessor can rely on the notice (unlike s129 of the Conveyancing Act). So the Lessor can rely on the notice unless the Supreme Court intervenes under s133F.
The effect of s133F is that if a lessee serves a notice of exercise of the option to renew, the notice is effective despite breaches which might otherwise render it ineffective, unless the lessor gives a prescribed notice specifying the breaches and stating that these breaches are to be relied upon in denying the lessee the right to exercise the option. Under s133F the burden of proving breaches is on the lessor and the burden of proving that the statutory discretion should be exercised in the lessee's favour is on the Lessee (see Re Denny's Restaurants Pty Ltd (1977) Qd R 92 followed in Evanel Pty Ltd v Stellar Mining N/L (1982) 1 NSWLR 380).
Mr Hallon refers to the decision of Einstein J in Nameless, Shameless and Legless Pty Ltd v 2 Roslyn Street Pty Limited (2004) NSWSC 519 to support the contention that in respect of a notice under s133E where that notice referred to an order mistakenly under s133E rather than s133F, then notwithstanding the incorrect reference, there is no doubt that the lessee was given the substance of the information in the notice to conform to the section and consequently the notice was found to be valid. The only authority therefore on what counted as mandated to be a prescribed notice is that it must give the substance of the information stipulated in s133E being subject to an order of the court under s133F, the lessor proposes to treat the breach as precluding the lessee from an entitlement to the option. Thus, the purpose of the s133E notice is to alert the lessee to the lessor's position in respect of the exercise of the option and to inform the lessee that subject to an order of the Supreme Court the lessor would regard the specified breaches as precluding the lessee to an entitlement to the option.
The purpose of a notice under s133E carries a different purpose to that of a notice under s129 of the Conveyancing Act. The Court of Appeal in Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (2010) NSWCA 268 (Hodgson JA, Allsop P and McFarlane JA agreeing) at [38] held:

A notice under s129 must not only allege breach, but must also 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 will abandon its claim to forfeit the lease. Section 129 is directed to allowing the tenant to bring about (within a reasonable time) a state of affairs which the landlord would not pursue forfeiture.

Against this background, the Lessees mount a number of challenges to the validity of the s133E Notice.

Validity of section 133E notice - the time of issue of the notice

The submission by Mr Zipser is that pursuant to section 133E(3)(a)(i) of the Conveyancing Act, the 'day of the giving of a notice by which the option is exercised' is critical for the 14 days within which the notice must be given to run. The contention is that on 6 May 2013, the GPC emailed a letter to the ALC dated 3 May 2013 which enclosed a copy of the notice exercising the option to renew the Lease. The letter is reproduced at paragraph 17 of these Reasons. Ms Cordwell received the email and attachment on the same day, i.e. 6 May 2013. Thus, if the exercise of the option to renew the Lease was received by the Lessor on 6 May 2013, then the s133E Notice had to be issued within 14 days, namely by 20 May 2013. In fact, the s133E Notice was issued on 21 May 2013, a day later, which complies with the receipt of the notice signed by Mr Gilles dated 3 May 2013 in accordance with s170 of the Conveyancing Act and ss76 and 77 of the Interpretation Act 1987 that it was received on the fourth working day after 3 May 2013.

Consequently, the submission that the day of 'the giving of the notice by which the option is exercised' was 6 May 2013. This is based upon the contention that by virtue of the correspondence between ALC and GPC between 2 April 2013 and 29 April 2013, that by 6 May 2013, the Lessor’s solicitor Ms Cordwell of ALC had at least ostensible authority to receive the notice on behalf of the Lessor.
Mr Zipser then submitted that Ms Cordwell had expressed her actual authority to receive the notice based on the fact that Mr Novkovic stated in cross-examination that at the time he engaged his solicitor in April 2013, he gave her general instructions 'to deal with the legal issues' and that on 21 May 2013, Ms Cordwell herself (and as is noted by Mr Zipser in contrast to the Lessor itself) issued and served the s133E Notice in response to the exercise of option. Mr Zipser than says that this means the Lessor's solicitor, Ms Cordwell, held actual authority to issue and serve the s133E Notice. Absent evidence to the contrary, if the Lessor's solicitor had actual authority to issue and serve the s133E Notice, then she had actual authority to receive the notice exercising the option (see Young v Lamb (2001) NSWCA 225).
A further submission from Mr Zipser is that if the Lessor's solicitor had actual/express or ostensible/apparent authority to receive the notice exercising the option on 6 May 2013, then 'notice given to an agent is effective as such if the agent receives it within the scope of his actual or apparent authority' (see NINL Ltd v Man Financial Australia Pty Ltd (2006) 15 VR 156 at [38] and [40]: Young v Lamb (2001) NSWCA 225: Mineaplenty Pty Ltd v Trek 31 Pty Ltd [2006] NSWSC 1203 at [38]).
Section 170 of the Conveyancing Act does not affect this conclusion. Section 133E(3)(a)(i) uses the term 'giving' rather than 'serving' and secondly, in any event, the service of notices specified in s170 of the Conveyancing Act are facultative and not exhaustive (Riltang Pty Ltd v L Pty Ltd (2002) 11 BPR 220, 281).
Mr Zipser submitted that in relation to the letter from Mr Gilles on 3 May 2013 but emailed on 6 May 2013, that letter comprised two documents, being the letter from Mr Gilles dealing with the alleged breaches and an enclosure being a copy of the notice of exercise of option. The letter stated in part:

We enclose with this letter a copy of notice of exercise of option under the lease.

In Mineaplenty Pty Ltd, Brereton J at [37] stated:

The issue is whether the purported exercise communicated a clear and unequivocal intention to exercise the option. This is resolved according to what a reasonable recipient of the notice, familiar with the terms of the lease and the surrounding circumstances - including the dealings between the parties - would have understood.

Mr Zipser submitted that:

the enclosure communicated a clear and unequivocal intention to exercise the option;

the letter stated an express intention to provide a copy of the notice of exercise of option to the Lessor's solicitor. There was no suggestion in the letter that the exercise of the option was conditional upon receipt by the Lessor of the actual signed letter from Mr Gilles or that the point in time of exercise of the option would be postponed until or conditional upon some other event occurring. A reasonable recipient of the letter, being a reasonable lawyer acting for the Lessor, would realise that receipt of the letter and the enclosure involved notification on that day of the exercise of the option; and

the covering letter added that the enclosure was also 'sent directly to your client's registered office and to his business address' however these words do not convey that the time of exercise of the option would be postponed until or conditional upon the Lessor itself receiving the enclosure which was posted 'directly to (the Lessor's) registered office and to his business address'.

Finally, Mr Zipser put forward the proposition that if we assume that the signed notice of exercise of option by Mr Gilles was not received by the Lessor and the Lessees then subsequently tried to contend that the option had not been exercised, the case law in the circumstances, as outlined, would support a conclusion that the Lessees had exercised the option by Mr Gilles emailing on 6 May 2013 with his letter dated 3 May 2013 to Ms Cordwell a copy of the notice of exercise and that in fact it would be concluded that the option to renew the Lease had been received and the Lease renewed (see Young v Lamb [2001] NSW CA 225).
Mr Zipser notes that on 21 May 2013, the Lessor served the s133E Notice. If the Tribunal agrees with the Lessees' position that the day of 'the giving of the notice by which the option is exercised' was in fact 6 May 2013, then the s133E Notice was not served within the 14 day period prescribed in s133E(3)(a)(i). This makes the notice invalid or ineffective. Bryson AJ (as he then was) in Sydney West Area Health Service v Staracek (2008) 73 NSWLR 68 at [10-11] approved a statement from an earlier decision of the NSW Supreme Court that:

The Court has taken the view that the requirement of s133E as to notice must be strictly complied with if the Landlord is to be entitled to rely upon a breach as negativing the right to exercise the option.

Lessor's contention on time of the issue of the s133E Notice

Mr Hallion submits that in the Application for Original Decision the Lessees plead an order that the Lessees have properly exercised the option on the basis that the notice in writing dated 3 May 2013 was forwarded to the respondent at the registered office of the respondent and that a copy was also sent on the same day to the business address of the respondent and the residential address of Mr Novkovic.
Then Mr Hallion points out that the Lessees asserted that they in fact rely on the email sent on 6 May 2013 being the letter of 3 May 2013 enclosing the notice of exercise of option forwarded to Ms Cordwell as the date upon which the option was exercised. The purpose of course for this contention is that if the option were exercised on that date then the s133E Notice is invalid having been issued out of time. This proposition however, requires an assessment as to whether a valid service of the exercise of the option could be affected by email on a landlord's solicitor.
Mr Hallion points to the decision of Adams J in Lo Guidice v Bivano (No 2) (1962) VR 429 where a notice of option was served on the solicitors for the landlord who were acting for the landlord on a claim for forfeiture at [434]:

I do not consider proper notice of the exercise of this option was given. The lessors were not given written notice of the exercise of the option. The notice was served only on the solicitors acting for the plaintiffs in this action. In the absence of evidence that the solicitors had any authority to receive such notice, or that they in fact communicated the receipt thereof to the plaintiffs in due time or at all, and there was no such evidence of this, I am unable to conclude that the notice required by the lease was given. No authority was cited to me and I know of none to justify the conclusion that solicitors in the position of the plaintiff's solicitors in this action, as such, have implied authority to receive such notices as that under consideration on behalf of their clients.

Mr Hallion points out that it is clear from the terms of the Lease, if there is no provision for an agent or nominee to accept service of notices, then Ms Cordwell did not have the requisite authority as submitted by Mr Zipser. This is the same issue as raised by Mr Hallion that in fact the Lease has no provision for agents relating to notices at all, either the service, delivery or the giving, when challenging the notice of exercise of option signed by Mr Gilles.
Mr Hallion then referred to the summary by Kirby P whether an email can be adjudged as giving notice of exercise of an option in Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR at [673] and [677B-678BA]:

1. The primary rule is that the purported exercise of the option must express clearly and unequivocally the fact that it is intended. Ballas v Theophilos (No 2) (1957) 98 CLR 913 at 916.
2. It is not necessary for example, for the effective exercise of an option that terminology conforming precisely to the terms of the option (Ballas at 205).
3. The appropriate question to be asked is what anybody who received the letter…would fairly have understood to be the meaning of it, in all the circumstances of its receipt, Carter v Hyde (1923) 33 CLR 115 at 126 adopting Jones v Daniel [1894] 2 Ch 322.
4. Although where a notice mistakes the terms of the option it may nevertheless amount to an unqualified and unconditional exercise, Quadling v Robinson (1976) 137 CLR 192 at 201.
5. Every case ultimately depends on its own facts upon the proper construction of the document in dispute.

This passage was specifically endorsed by the Court of Appeal in Young v Lamb [2001] NSWSC 225.

Consequently. the submission made by Mr Hallion is that the letter/email by Mr Gilles whereby at the end of the email there is reference to the enclosure of a copy of the notice of exercise of option does not pass the test as put forward by Kirby P. In particular a recipient of that email enclosing a copy of the notice of exercise would not have understood the meaning of it to be the actual exercise of the option to renew. This is contrary to the position put by Mr Zipser on this very point.

Resolution by the Tribunal on the question of the correct date for issue of the s133E Notice

Mr Hallion submitted that the position that the Lessees have taken is ambiguous in that on the one hand there is an assertion that the option was exercised pursuant to the written notice, albeit signed by Mr Gilles, on 3 May 2013 which was sent in a formal manner for the purpose of complying with the terms of the Lease to exercise the option to renew, and now it is argued by the Lessees that the option was in fact exercised on 6 May 2013 via the email sent to Ms Cordwell.
The analysis by Kirby P was followed by Lindsay J in C & P Syndicate Pty Ltd v Reading [2013] NSW SC 43. There, the question before the Court was whether a put option was properly exercised. Interestingly, the facts in this case are very similar to the proposition put forward by Mr Zipser referred to in paragraph 75 of these Reasons to assume that the actual exercise of option was not received by the Lessor. In C&P Syndicate the requirement for exercise of the put option was that the option may be exercised by 'the vendor…by notice in writing of the exercise, accompanied by a duly executed contract…'. The solicitor for the vendor prepared a letter of exercise and according to his evidence inserted the letter in an envelope together with an executed contract and sent it to the solicitor for the purchaser. The solicitor also sent an email shortly thereafter to the solicitor for the purchaser advising that he had instructions that the vendor intended to exercise the put option and they would formally provide a notice by mail tomorrow. Unfortunately, when the solicitor for the purchaser received the envelope and opened it, on his evidence, there was no notice of exercise in the letter as suggested but only the executed contract.
Lindsay J found firstly that in all probability the notice of exercise prepared by the solicitor for the vendor was included in the envelope with the executed contract so the put option was exercised. However, he also held after a very considered analysis that the email sent by the solicitor also constituted the requisite notice of exercise of the put option. In the circumstances of the terms of the put option and the facts in that case, Lindsay J held that the email constituted actual formal notice of exercise. I note in passing in relation to this case that no objection was made to the fact that the solicitor for the vendor and not the vendor itself had signed the notice of exercise of option.
As noted, Mr Zipser for the Lessees asserts that a notice or document can be served on a Lessor's agent if it is the case that the Lessor's agent has actual or ostensible authority to receive the document or notice. The solicitors for both parties took no objection to the execution of notices by themselves as representations but were particular to ensure that any notice served directly on a party was copied to them. This conduct is consistent that each considered themselves and each other as authorised agents to act for the parties and to issue and receive notices As the Tribunal has found, the parties adopted a course of conduct to have communications between them conducted by their respective legal advisers. In these circumstances the Tribunal finds that Ms Cordwell had the requisite authority to receive any notice of exercise of option. I believe this overcomes the submission made by Mr Hallion based on the passage of Adams J in Bivano where his Honour held that the landlord's lawyer did not have authority to receive notices.
However, it is the question of the intention of the sender of each piece of correspondence that must be determined. The Tribunal notes from the letter/email of 6 May 2013 sent by Mr Gilles that the concluding comment is:

We enclose with this letter a copy of exercise of option under the lease sent directly to your client's registered office and his business address.

Following the analysis of Kirby P in Prudential and Lindsay J in C& P Syndicate it is clear that each case ultimately depends on its own facts and the proper construction of the document. I agree with the submissions by Mr Hallion. In particular I take the view that the letter/email from Mr Gilles would be read by the recipient as not intended at that time to be the actual exercise of option, but rather the notice was enclosed as a matter of courtesy. This is consistent with the arrangements between the parties, that communications would be conducted through their legal advisers and as the notice was sent to the Lessor directly, a copy is provided. Consequently, the intention was that the letter of 3 May sent to the registered office of the Lessor was the actual formal exercise of the option to renew the lease.
The Tribunal sees this problem as a question of timing. Originally the Lessees argued that the option to renew the lease was exercised by the letter from Mr Gilles on 3 May 2013 sent directly to the Lessor which upon the day of receipt would mean that the s133E Notice was issued within time. Now the Lessees submit that in fact the option to renew was exercised pursuant to the email of 6 May 2013 which was received by the Lessor (through its agent Ms Cordwell) earlier in time than the letter from Mr Gilles. The Lessees elected that the option to renew was exercised by the letter from Mr Gilles of 3 May 2013 and should not now approbate and reprobate on this point.
The Tribunal also finds that the finding in C&P Syndicate, while based on similar facts, is distinguishable because the relevant question decided by Lindsay J was not necessarily when was the put option exercised but whether in fact it was exercised at all within the exercise period. Here there is no issue about whether the option to renew, if found valid, was exercised within the exercise period under the Lease. If the letter of 3 May 2013 never arrived (as surmised by Mr Zipser) then of course it is open for the email received on 6 May 2013 to constitute a clear expression of the desire of the Lessees to exercise the option to renew. However that is not the issue. There is no doubt the Lessees always desired to exercise the option. The question the Tribunal has to determine on this matter is when in fact was the option exercised and by what means. The Tribunal finds that it was always the intention of the Lessees that the notice of exercise of option was the letter from Mr Gilles on 3 May 2013 sent to the Lessor and that notice of exercise was not displaced by the email sent on 6 May 2013.
Consequently, the s133E Notice is valid as it was issued within the requisite time as required under s133E(3) to serve on the Lessees within 14 days after the giving by the Lessees of the notice of exercise of option. The Tribunal will now consider the validity of the s133E Notice based upon the content of the Notice and the alleged breaches referred to in the Notice.

Validity of s133E Notice - content and form of Notice

Mr Zipser submitted in relation to the form and content of the s133E Notice that as it is a prescribed notice it should contain far more detail regarding the alleged breaches and what perhaps was required for the remedy of such breaches. He submitted that the s133E Notice was vague and ambiguous and looked to the Court of Appeal in the Macquarie International Health case when determining the content of a notice under s129(1) of the Conveyancing Act. By comparison, the s133E Notice issued by Ms Cordwell was deficient in this regard and not in accordance with being a prescribed notice.
The Tribunal views that this is not a correct process to compare the content of a notice issued under s129(1) when looking at the form and content of the s133E Notice. The two notices serve different purposes. A notice of proposed forfeiture issued pursuant to s129(1) states that unless the alleged breaches are remedied to the satisfaction of the Lessor, no further action would be taken or, alternatively, the lessee could go to the Court to seek relief against forfeiture of the lease. Ultimately, as is often the case, the breaches are remedied and there is no further action. This is not the case with a notice issued pursuant to s133E. In fact, the breaches cannot be remedied at all because no time for the remedying of the breaches is provided in the notice. The breaches are usually past breaches of the lessee. This assessment is based on the history of the relevant sections as outlined earlier in the Law Reform Commission Report introducing these sections as a consequence of the harsh decision in Pitt Club.

Validity of s133E Notices - breach of lease obligations

As noted, the s133E Notice listed a number of purported breaches. The first was a non‑payment of rent. This arose in part out of an earlier dispute regarding the interpretation of the rent review mechanism under the Lease. The evidence before the Tribunal from Ms Fedeli was equivocal on this matter. Ultimately, as it transpired, a payment of rent was missed shortly prior to the exercise of the option. Mr Hallion in his submissions points to the following passages out of the Transcript (T52 L):

Member: I understand Mr Hallion. I think we've established that there may be a concession now by the applicant that at the time the S133E Notice was given the base rent was not up to date. Do I understand that to be the concession?
Zipser: I'm going to make the following partial concession and that is that subject, based on the witness' current answer we concede that the payment on 2 May of $5,000.00 was not received by the Landlord's agent and therefore at the time of the notice of exercise the option was served on 6 May, the Tenant was in arrears by $5,000.00, but the one qualification is that I'm going to ask Ms Fedeli overnight to check her computer records to see where the payment of $5,000.00 on 2 May was paid. I expect that her records will confirm what she opines now that the payment was made to another third party….

Mr Hallion states that this concession was given before Ms Fedeli was cross examined and in cross examination her evidence confirmed the basis of the concession, that is, the rent was not paid until 27 May 2013, when it was due on 1 May 2013 and that payment within 14 days of the due date was an essential term of the Lease.
It was hard to ascertain the position regarding payment of rent but, ultimately, as it transpired through the cross examination of Ms Fedeli, and the concession made, that it is an agreed fact that at the time the option was exercised, the Lessees were in breach of the Lease regarding payment of the rent for the month of May 2013.

Description under the Lease

Mr Zipser submits the Lease describes the land as 'Lot 1, DP783010 (part) being lock‑up shop situated on Ground Floor,[****]Surry Hills, known as 'Il Baretto". Mr Zipser submits that if the description of the land in the Lease was just 'lock‑up shop' then the cases support the conclusion that a yard behind the lock up shop is not usually part of the description of lock up shop and not part of the premises (see Ong v Luong (1991) 9 BPR 16, 759). The point of distinction between 'Il Baretto' and the line of cases in Ong is of the additional words handwritten on the front page of the Lease form known as Il Baretto.
Mr Zipser submits that between 1999 and just prior to the Lease being signed when the lease was negotiated the Lessees used the areas (a), (b) and (c) as part of the restaurant. They seated and served customers in the courtyard up to 2002 but from that date until just prior to the dispute the Lessees allowed customers to smoke in the courtyard and customers sometimes 'took their drinks to have their cigarette in the courtyard'. Further since 1999 customers have had to walk through part of the courtyard to reach the toilets. The customers would have observed the storage of the items relating to the restaurant in the courtyard. As part of the submission Mr Zipser maintains that customers as well as passers by would assume that the toilets and the courtyard were solely for the use of customers and staff at the restaurant Il Baretto.
The next submission from Mr Zipser is that the Lessor had knowledge of most of these matters relating to the use of the courtyard by the Lessees as the Lessor occupied the upstairs office and its director Mr Novkovic was often present in the building and walked through the courtyard and would have observed the use by the Lessees. Thus Mr Zipser's submission is that the name 'Il Baretto' connotes a wider use of the premises than as referred to by the Lessor as being the premises on the front page of its copy of the Lease and in accordance with the decision of Ong.

Wheeldon v Burrows

Mr Zipser makes a further submission based on the case of Wheeldon v Burrows. Professor Peter Butt in his book Land Law, Fifth Edition, Law Book Company 2006 at (446) says:

Easements may be impliedly granted under what has come to be known as the rule in Wheeldon v Burrows (1879) 12Ch D31 … … There are four elements necessary for the implied grant of an easement under the rule in Wheeldon v Burrows:
(1)   there must be a grant of part of the land - a severance;
(2)   at the time of the severance, exercise of the quasi‑easement must be 'continuous and apparent';
(3)   the quasi‑easement must be necessary for the reasonable enjoyment of the land granted …; and
(4)   at the time of the severance, the grantor must have used the quasi‑easement for the benefit of the land granted.
All four elements must be satisfied if the easement so granted is legal not merely equitable.

Mr Zipser submits that each of these four elements are established in the present matter. In relation to element one there was a grant of part of the land or severance at the time of commencement of the Lease. In relation to the second element the evidence indicates that in the years leading up to the commencement of the Lease including the period of negotiation there was a continuous and apparent use by the Lessees of the courtyard for storage of items for the restaurant and use by the staff and patrons of the restaurant to walk around, relax and smoke as well as access for the toilets. Further, the Lessees have also used the courtyard to receive deliveries of food and drink for the restaurant. This is evidenced by the fact that a lattice work fence between 494 and 496 Bourke Street was erected and that fence is still in place and that over the years the Lessees have used the courtyard to receive deliveries of food and drinks.
In relation to the third element, Mr Zipser refers to the decision of Handley JA in Wilcox v Richardson (1997) 43 NSW LR 4 at [14‑15] as follows:

Easements and other ancillary rights, sometimes described as apparent accommodation … are implied in accordance with the rule in Wheeldon v Burrows, where they are necessary for the reasonable enjoyment of the property expressly granted … The true test, implicit in the general authorities, and expressed in Wheeldon v Burrows, is the more liberal test of whether the implied rights were 'necessary for the reasonable enjoyment of the property granted'. The difference is significant, because rights which are not necessary for the operation of the business may be necessary for its reasonable operation and hence for the reasonable enjoyment of land leased for that business. Expressed in other words, such rights may be needed to give such business efficacy to the transaction as must have been intended at all events by both parties who are businessmen.

Mr Zipser also draws the Tribunal's attention to the decision of Palmer J in Kavia Holdings Pty Ltd v Bellavista Pty Ltd (2006) NSW SC 633 at [10]:

The test is one of reasonable convenience and practicality, not of absolute necessity, and convenience and practicality must be assessed in the light of the factual matrix at the time the estate and land was granted. So, if both parties to the grant contemplate that the grantee uses its land for a certain purpose or in a certain way, and at the time of the grant the land is in fact used in that way or for that purpose by means of an accommodation over the grantee's land, that in itself will usually be strong evidence that the accommodation is necessary, in the sense of reasonable convenient and practicable, for the reasonable enjoyment of the estate granted.

Mr Zipser puts forward the proposition that the nature of the Wheeldon v Burrows easement in respect of the courtyard is an easement to use the courtyard for the business of the Lessees. This easement was and is necessary for the reasonable enjoyment of the property expressly granted under the Lease, namely the lock up shop for Il Baretto. It is asserted that at the time of the grant of the Lease, the Lessor and the Lessees 'contemplated that the grantee will use' the courtyard for the business of the Lessees and the land was in fact used in that way. As stated in Kavia Holdings 'that in itself will usually be strong evidence that the accommodation is necessary, in the sense of reasonably convenient and practicable for the reasonable enjoyment of the estate granted'.
Mr Zipser's next submission is that the Lessees have an easement over the areas (a), (b) and (c) based on common intention of the parties in light of the evidence and facts adduced during the hearing. Finally, he submits that the Lessor is estopped from denying the entitlement of the Lessees to use the areas (a), (b) and (c) based on the conduct of the Lessor in allowing such areas to be used by the Lessees during the time that 'Il Baretto' occupied the building and it would be unconscionable for the Lessor to depart from this alleged waiver.
Mr Hallion submitted that the Lessor has always acknowledged that the Lessees have ancillary rights to use the courtyard and the facilities pursuant to the Lease. It is significant that the effect of the assertions now made by Mr Zipser on behalf of the Lessees as to proprietary rights in the courtyard is to reinstitute what was given up under the 1999 lease and which the Lessees acknowledge at the time of entering into the Lease is no longer part of the subject matter of the Lease, namely the garden area/courtyard. This was acknowledged by Ms Fedeli in the deed of assignment in 2004 that in relation to the garage at the rear, there were proposed development works being considered by the Lessor.

Mr Hallion contends that the ancillary rights to use the toilets and the courtyard for storage cannot give rise to a prescriptive right to the Lessees to stipulate that the Lessor will not during the term of the Lease remove or change the access to toilets and storage from as it was at the commencement of the Lease. The Lessor also had use of the courtyard and the toilets and access through the courtyard to enter his office upstairs. There is nothing in the evidence provided on behalf of the Lessees to imply that the use over the courtyard by the Lessees is exclusive. In fact there was evidence from the Lessor by Mr Novkovic that he and his invitees used the toilets and accessed his office via the courtyard entering at the rear. The evidence as provided on behalf of the Lessees shows a casual use of these facilities and in conjunction with other occupants of the building. There is no creation of an easement to prevent the proposed development by the Lessor.

Resolution by the Tribunal

The Tribunal notes from the evidence presented by the Lessees regarding use of the courtyard that it is predominantly in respect of recreational activities such as the casual smoking and taking of drinks by employees and patrons and the storage of restaurant items. It is notable that there has been no significant use of the courtyard to serve meals to the patrons of II Baretto. It is hard to see how the use of the courtyard by employees and patrons for stretching their legs and the taking of a drink or a cigarette can of itself give rights to a proprietary interest in the courtyard, especially on such a casual and adhoc basis of use.
In adjudging the evidence presented by Ms Fedeli to the Tribunal, the Tribunal believes that Ms Fedeli perhaps tended to over reach on various aspects, for example in paragraph 5(u) of her Affidavit of 20 August 2014 she says 'there is only one small storage cupboard and the café utilises the courtyard area as a whole for storage.' If this were the case, then there would be no room for the employees and customers to stretch their legs and take a cigarette or have a casual drink as suggested by other witnesses. It is hard to believe that in fact the Lessees use the whole courtyard area as storage. This is but one of many examples. Mr Hallion made very strong submissions on the reliability of the evidence from Ms Fedeli. The Tribunal, however, does not find it necessary to make any further comment.
Access to the toilets again is in common with other occupants of the building. The fact that items are stored sometimes in the courtyard with the consent of the Lessor is only an ancillary right or a license and again gives no proprietary interest to the Lessees in the courtyard. In the Tribunal's view none of the facts satisfy the elements in Wheeldon v Burrows. Smoking or stretching legs in the courtyard cannot be necessary for the reasonable enjoyment of the property granted. The employees and patrons can go into the street to smoke and relax if they wished. It is not necessary that they go into the courtyard for the enhancement of the Lease of the restaurant premises. None of this gives the Lessees significant proprietary rights over the courtyard as a result of the casual use of the courtyard by patrons and employees and storage by the Lessees.
There was a significant change to the conduct of the business of II Baretto in that the Lessor now sought to ensure that the Lessees were complying with the development consent as it was understood and not to serve patrons food and drink in the courtyard. This change in the conduct of the business was acknowledged in the evidence by Ms Fedeli and her employees. Cessation of that use was confirmed by Mr Gilles in his letter of 3 May 2013 when enclosing a copy of the exercise of the option. Further, the Tribunal is of the firm view that the casual storage of items does not of itself create any proprietary interest in the courtyard.
The addition of the words 'known as Il Baretto' does not of themselves change anything. Leaving aside again the question of who added these words to the registration copy of the Lease and by what authority, the Tribunal is satisfied that in 2008 when the Lease was entered into between the parties the area occupied by the restaurant and known to be occupied by the restaurant was only the lock up shop as denoted in the Lease. Any extension into the courtyard by the Lessees is, as acknowledged by the Lessor, only pursuant to ancillary rights.
Significantly, clause 11.3 of the Lease states as follows:

11.3   If the property is part of a building owned or controlled by the landlord:
11.3.2   if the property has facilities and service connections shared in common with other persons the landlord must:-
11.3.2.1   allow reasonable use of the facilities and service connections including-
The right for the tenant and other persons to come and go to and from the property over the areas provided for access.
11.3.2.2   maintain the facilities and service connection in reasonable condition.

The Tribunal accepts the position put forward by Mr Hallion on behalf of the Lessor that the common intention of the parties is as expressed in the Lease and in the previous leases that if the courtyard/garden was included then it was part of the demised premises. However where it is not included then there is an ancillary right to come and go over the courtyard in association with ancillary rights to use the facilities in accordance with clause 11.3 of the Lease. Mr Zipser raised the question of estoppel on the Lessor. The Lessor does not dispute a right for the Lessees to use and to store items in the courtyard as ancillary rights consistent with clause 11.3 of the Lease. Accordingly, the Tribunal agrees with the submission by the Lessor that these rights of the Lessees to use the areas (a), (b) and (c) are ancillary only in accordance with clause 11.3.2 of the Lease and create no proprietary interest in those areas in the Lessees.

Derogation from the grant

As Mr Hallion submitted, the final question for consideration by the Tribunal is whether the proposed development of the Lessor derogates from the right of the Lessees under the Lease in respect of the use of the areas (a), (b) and (c).
In relation to the proposed works, Ms Fedeli says in her affidavit of 29 May 2014 at paragraphs 30‑32:

30.   The Landlord's proposed redevelopment will, according to the plans, and documentation I have seen, require the demolition of the current toilets and storage facility that are utilised by Domenico and me for running the business.
31.   The plans are for a new mix commercial and residential building to be built in the courtyard area both 494 and 496 Bourke Street, Surry Hills.
32.   At present, the café utilises the toilets and storage in the courtyard and accesses those facilities through the courtyard. The courtyard is also used for storage and it is where Domenico and I place the bins for the café.

In a further affidavit dated 20 August 2014, Ms Fedeli expands on the effect of the proposed development by the Lessor on the business of Il Baretto. She says at paragraph 5(u):

5(u) … I say that the proposed works do not address the issue of bin storage, nor does it allow for space to store the items such as the heaters, gas bottles, and dirty linen that we currently store in the courtyard. There is also no clear indication of how the issue of ventilation is to be addres (sic). Presently the café draws its fresh air from the front and rear doors because many of the side windows are painted or nailed shut. Those that open are open to the elements and must be closed during foul weather. I also note:
(i)   there is no plan for use or placement of the temporary toilets during the period of construction;
(ii)   there is no time‑frame for work to be completed;
(iii)   there is no indication of the stages to be undertaken;
(iv)   the toilets are referred to as disabled toilets on the plan but the property is not disability friendly ‑ it has a step to enter and a step to exit and there is no mention of any works to be done to alter this;
(v)   the bin storage provider allows for two bins, the café uses five bins;
(vi)   there is only one small storage cupboard and the café utilises the courtyard area as a whole for storage.
(vii)   … we utilise all five bins for the restaurant and they are filled daily. …

Mr Zipser on behalf of the Lessees strongly submits that the decision of Kavia Holdings Pty Ltd v Bellavista Pty Ltd (2006) NSW SC633 has some similarities to this dispute. There a restaurant had operated on the site since 1988 under an arrangement whereby garbage was placed in a 'garbage room' on common property. In 2006 the landlord informed the tenants that under the terms of the lease the restaurant's garbage now had to be stored and disposed of from the restaurant's premises.
In Kavia, Palmer J applying the rule in Wheeldon v Burrows accepted the tenant's submission that 'accommodation on the common property of the festival market building, whether in the garbage room or elsewhere, for the storage of garbage, removed from the restaurant premises is, and was at the time of grant of the sub-lease to Kavia, necessary for the reasonable enjoyment of the demised premises so that a term of forwarding such an accommodation or ancillary right is to be implied in the grant'. However, what Palmer J did not accept at [41] was that 'this implied or ancillary right gives Kavia some sort of prescriptive right over the garbage room or over the loading dock nor does it entitle Kavia to stipulate, in its own discretion, where that area is to be located. However, the location must be reasonably convenient to the demised premises.' Finally, Palmer J at [42] went on to decline the injunction sought by the tenants in Kavia 'because it is open to Bellavista to designate some area on the common property other than the garbage room or the loading dock as a rubbish storage area in accordance with the declaration I propose, I do not think it is appropriate at this stage to grant injunctions against Bellavista on the terms presently sought in the Amended Statement of Claim. If Bellavista does not provide a garbage storage area in accordance with Kavia's rights, as declared, Kavia may bring the matter back for the working out of further orders and the granting of further relief.'
The result in Kavia, as noted in the previous paragraph, is consistent with the submission on behalf of the Lessor that the ancillary rights that the Lessees have to use of the areas (a), (b) and (c) does not give the Lessees some sort of 'prescriptive right' nor does it entitle the Lessees 'to stipulate, in its own discretion' the convenient means of giving affect to these rights.

Submission by the Lessees

Mr Zipser refers to clause 11.1 of the Lease which is the covenant for quiet enjoyment. It states as follows:

11.1 So long as the tenant does all the things that must be done by the tenant under this lease the landlord must allow the tenant to possess and use the property in anyway permitted under this lease without interference from the landlord or any person claiming under the landlord or having superior title to the land.

Mr Zipser relies on the decision of Kazas & Associates Pty Ltd v Multiplex (Mountain Street) Pty Ltd 2003 [NSW] SC840, another decision by Palmer J, where the Court considered a proposed development and the interference with the tenant's right of quiet enjoyment. Whilst that decision is very instructive on the issues, I agree with Mr Hallion that it can be easily distinguished from the circumstances in this case. The proposed development was a very substantial development of a building which had been used as a warehouse and was being converted into residential units. The tenant leased an area on the first floor and the proposed development would significantly interfere with its quiet enjoyment, rendering the premises less fit for the purpose for which the lease was given and consequently derogate from the grant. The tenant applied to the Court for an injunction restraining the landlord carrying out certain aspects of the development during the course of the tenancy. The Court granted some of the requirements of the tenant, but in this case its quite clear that the proposed development is not as substantial as in Kozas.

Again Mr Hallion submits that the business of 'Il Baretto' as a restaurant being the dining and kitchen facilities and the service of patrons would be unaffected by the proposed works. The City of Sydney Council granted the development consent for the development after due consideration of the Notice of Objection from the Lessees. It is notable that Mr Novkovic gave evidence to the Tribunal in both his capacity as a director of the Lessor and as a builder and engineer of many years’ experience in undertaking developments that a methodology would be adopted in relation to the development that would allow the Lessees to continue their proposed business. And his evidence was not challenged. There was also consideration in the manner in which alternate facilities for toilets and storage were to be provided and it should be noted that Mr Novkovic took expert advice and had the original proposal regarding the development amended to accommodate a number of the concerns of the Lessees.
Finally, Mr Hallion refers to strong cross-examination of Ms Fedeli in putting to her that she had no legitimate complaint about interference to the business of 'Il Baretto' and to the extent she had raised issues with the Lessor, these have been attempted to be addressed by the Lessor but on the evidence of Ms Fedeli nothing would be acceptable unless there was some commercial advantage to the Lessees.
The submission by Mr Zipser in seeking an injunction similar to what was granted to the tenant in Kazas relies significantly on a greater interest in the areas (a), (b) and (c) than what the Tribunal found that the use of areas (a), (b) and (c) are ancillary rights pursuant to the Lease, in accordance with clause 11.3. The Tribunal is satisfied regarding the evidence that the interference with the tenancy of 'Il Baretto' would be insignificant other than the usual rights that a lessee would have pursuant to section 34 of the RLA for disturbance.
Finally, Mr Hallion submits that the evidence from Mr Novkovic in his affidavit of 2 March 2015 taken with his evidence in cross-examination and in the absence of any contrary expert evidence on behalf of the Lessees, is that:

post development, the existing storage area is in fact doubled from 2.04sqm to 5sqm;

the present common area under the stairs while not forming part of the demised premises under the Lease will only be accessed by the Lessees and in effect be for the Lessee’s exclusive use;

the current area leased is 80sqm being the lock up shop and will after the development of the area give the Lessees exclusive access to a further 31sqm where the toilets and storage are situated;

the new area under the Lessees control would exceed what the Lessees claim as 80sqm plus common access to the 28sqm of the courtyard if their submissions were accepted;

objectively the areas in which the Lessees would have effective exclusive access and the area under the Lessee’s control is increased by an overall 38.75%; and

the area for staff to take breaks will continue, the development consent presently does not allow staff to take their meals in the courtyard if in doing so they sit at a table and chair. Thus there is no change in the usage of the rear area from present. However, staff will be able to continue to take breaks.

As noted in paragraph 2 of these Reasons, the dispute between the parties has traversed some very complex issues and in the end turns on the inconvenience to the Lessees for storage of restaurant items and the allocation and position of the bins used by the Lessees. The Tribunal is satisfied that these issues are being accommodated by the Lessor in the proposed development as outlined by Mr Novkovic. In these circumstances the Tribunal rejects the application by the Lessees for an injunction.

Costs

The Tribunal does not believe it would be appropriate to make any costs order in this dispute. However, if the parties think otherwise then the parties should make submissions regarding costs within 28 days of the publication of these reasons.

Orders

The Tribunal makes the following orders:

The option to renew was exercised in accordance with the terms of the Lease;

The Applicants are entitled to the option to renew the Lease notwithstanding the s133E Notice;

The Applicants are entitled to the option to renew the Lease notwithstanding a breach of clause 4.2.2.

Any costs application pursuant to section 60 of the Civil and Administrative Tribunal Act 2013 or Rule 38 of the Civil and Administrative Tribunal Rule 2014 must be lodged in the Tribunal and served on the costs respondent within 21 days of the date of this order either attaching or referring to the documents relied upon in support of the application.

The costs respondent will have 21 days after the date of receipt of the costs application referred to above, to lodge in the Tribunal and serve on the costs applicant the submissions, if any, in response to the costs application, such submissions either attaching or referring to the documents relied upon.

The cost applicant will have 14 days after the date of receipt of the cost respondent's submissions to lodge in the Tribunal and serve on the costs respondent the submissions, if any, in reply, such submissions either attaching or referring to the documents relied upon.

The Tribunal will determine any costs application on the basis of the papers lodged in the Tribunal.

D Bluth

Senior Member

Civil and Administrative Tribunal of NSW

4 March 2016

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 15 June 2016

Medium Neutral Citation:	Fedeli and Santopadre v Alex Constructions Pty Ltd [2016] NSWCATCD 34
Hearing dates:	2, 3 March, 14 May, 15 June 2015
Decision date:	04 March 2016
Jurisdiction:	Consumer and Commercial Division
Before:	D Bluth, Senior Member
Decision:	1. The option to renew was exercised in accordance with the terms of the Lease. 2. The Applicants are entitled to the option to renew the Lease notwithstanding the s133E Notice. 3. The Applicants are entitled to the option to renew the Lease notwithstanding a breach of clause 4.2.2. 4. Any costs application pursuant to section 60 of the Civil and Administrative Tribunal Act 2013 or Rule 38 of the Civil and Administrative Tribunal Rule 2014 must be lodged in the Tribunal and served on the costs respondent within 21 days of the date of this order either attaching or referring to the documents relied upon in support of the application. 5. The costs respondent will have 21 days after the date of receipt of the costs application referred to above, to lodge in the Tribunal and serve on the costs applicant the submissions, if any, in response to the costs application, such submissions either attaching or referring to the documents relied upon. 6. The cost applicant will have 14 days after the date of receipt of the cost respondent's submissions to lodge in the Tribunal and serve on the costs respondent the submissions, if any, in reply, such submissions either attaching or referring to the documents relied upon. 7. The Tribunal will determine any costs application on the basis of the papers lodged in the Tribunal.
Catchwords:	Clause 4 of the Law Society Commercial Lease, exercise of option to renew by a solicitor, solicitor's authority to issue and receive notices under the Lease and the Conveyancing Act, validity of s133E Notice under the Conveyancing Act and the doctrine of approbation and reprobation
Legislation Cited:	Conveyancing Act 1919 Retail Leases Act, 1994
Cases Cited:	C & P Syndicate Pty Ltd v Reading [2013] NSW SC 43 Comdox v Robins (2009) NSWSC 367 Cronulla Newsagency Pty Ltd v Piazzala [2002] NSWADT 121 Gilbert J McCaul (Aust) Pty Ltd v The Pitt Club Ltd (1957) 59 SR (NSW) 122 Kavia Holdings Pty Ltd v Bellavista Pty Ltd (2006) NSW SC 633 Kazas & Associates Pty Ltd v Multiplex (Mountain Street) Pty Ltd 2003 [NSW] SC840 Kent v Hogarth (1995) QCA 472 Lo Guidice v Bivano (No 2) (1962) VR 429 Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (2010) NSWCA 268 Mineaplenty Pty Ltd v Trek 31 Pty Ltd (2006) NSWSC 1203 Nameless Shamelss and Legless Pty Ltd v 2 Roslyn Street Pty Limited (2004) NSWSC 519 New South Wales Netball Association Ltd v Probuild Constructions (Aust) Pty Ltd VC 2015 08874 Ong v Luong (1991) 9 BPR 16, 759 Prudential Assurance Co Ltd v Helth Minders Pty Ltd (1967) 9 NSWLR Rilfang v L Pty Ltd (2002) 11 VPR 20, 281 Steak Plains Olive Farm Pty Ltd v Australian Executor Trustee Limited [2015] NSWSC 289 Subway Realty Pty Ltd v The Investment 1 Pty Ltd (2010) NSWADT 123 Sydney West Area Health Service v Staracek (2008) NSWSC 744 [16] Young v Lamb (2001) NSWCA 225 Wheeldon v Burrows (1879) 12Ch D31 Wilcox v Richardson (1997) 43 NSW LR 4 Zhang v VP302SPV (2009) NSWCA 73
Texts Cited:	Bowstead & Reynolds on Agency 16th Ed Halsbury's Laws of England Land Law by Peter Butt, 5th ed. Law Book Company
Category:	Principal judgment
Parties:	Gabriella Fedeli and Domenico Santopadre (Applicant) Alex Constructions Pty Ltd (Respondent)
Representation:	Solicitors: Giles Payne & Co (Applicant) ALC Lawyers (Respondent) Counsel: Mr Ben Zipser (Applicant) Mr J Hallion (Respondent)
File Number(s):	COM 14/00308
Publication restriction:	Nil