Forte-Senes Hotels Pty Ltd v Austcorp No 473 Pty Ltd

Forte-Senes Hotels Pty Ltd (the plaintiff) brought proceedings against Austcorp No 473 Pty Ltd (the defendant) concerning a lease agreement. The dispute centred on whether the lease had been surrendered by operation of law, and the enforceability of a guarantee in the lease. The matter was heard in the Court of Appeal of New South Wales.

The court was required to determine two primary legal issues. Firstly, whether the lease was surrendered by operation of law due to the lessor's actions in placing the premises with an agent for reletting, or because the proposed assignee vacated the premises without the lessee retaking possession. Secondly, the court had to consider whether a deletion within a sub-clause of the guarantee indicated that the guarantors were not liable in the event of an assignment of the lease.

The Court of Appeal held that neither the lessor's decision to relet the premises nor the proposed assignee's departure from possession, coupled with the lessee's failure to resume possession, constituted a surrender of the lease by operation of law. The court reasoned that a surrender by operation of law requires a clear intention by both parties to bring the lease to an end, which was not evident in these circumstances. Furthermore, the court found that the deletion in the guarantee sub-clause did not absolve the guarantors of liability upon an assignment of the lease.

The appeal was allowed, and the judgments and orders made below were set aside. In their place, judgment was entered for the plaintiff on its claim for $118,634.51, effective from 20 December 2002. The defendant's cross-claim was dismissed, and the defendants were ordered to pay the plaintiff's costs of both the claim and the cross-claim, as well as the plaintiff's costs of the appeal, with a certificate under the Suitors Fund Act if applicable.