Gelin v Sumner (RLD)

[2012] NSWADTAP 52

Administrative Decisions Tribunal

New South Wales

Medium Neutral Citation:

Gelin v Sumner (RLD) [2012] NSWADTAP 52

Hearing dates:

16 August 2012

Decision date:

12 December 2012

Jurisdiction:

Appeal Panel - Internal

Before:

M Chesterman, Deputy President
D Bluth, Judicial Member
J Butlin, Non-judicial Member

Decision:

1. The appeal is dismissed.

2. Any application by the Respondents for the costs of the appeal must be filed and served within 35 days, along with supporting submissions and any additional submissions they may wish to make as to the costs of the Tribunal hearing. Any submissions in reply by the Appellant must be filed and served within a further 28 days. These matters of costs will then be determined 'on the papers', pursuant to section 76 of the Administrative Decisions Tribunal Act 1997, unless the Appeal Panel decides that a hearing is required.

Catchwords:

Retail lease - eviction of lessee - whether agreement terminated - whether guarantors released from liability for future rent

Legislation Cited:

Administrative Decisions Tribunal Act 1997
Conveyancing Act 1919
Corporations Act 2001 (Cth)
Retail Leases Act 1994

Cases Cited:

Belperio v Linehaul Holdings Pty Ltd (2004) 89SASR 185; [2004] SASC 238
Byrnes v Jokona Pty Ltd [2002] FCA 41
Lagouvardis v Brett and Janet Cottee Pty Ltd (1994) NSW ConvR 55-714 (BC9402842)
Todbern Pty Ltd v Taormina International Pty Ltd (1990) 5 BPR 11,1173 (BC9002319)
Torminster Properties Ltd v Green [1983] 2 All ER 457
World Best Holdings Limited v Sarker [2010] NSWCA 24

Category:

Principal judgment

Parties:

Ben Ami Gelin (Applicant)
Ian Ross Sumner (First Respondent)
Louise Gay Sumner (Second Respondent)

Representation:

Counsel
D Mahendra (Respondents)
B Gelin (Applicant in person)
Messenger & Messenger (Respondents)

File Number(s):

129009

 Decision under appeal 

Citation:

Gelin v Sumner [2012] NSWADT 81

Date of Decision:

2012-05-02 00:00:00

Before:

Retail Leases Division

File Number(s):

115102

reasons for decision

Introduction

1. This is an appeal against a decision of the Retail Leases Division of this Tribunal (Gelin v Sumner [2012] NSWADT 81). In it, the Tribunal dismissed proceedings brought by the lessor under a retail shop lease ('the Lease') to recover amounts claimed to be owing to him since 2008 by the guarantors of the lessee's liabilities under the Lease.

1. The lessor, Dr Ben Gelin, was the Applicant in the first instance proceedings and the Appellant in these proceedings. During 2008, he was a practising solicitor, being the principal of a firm called Ben Gelin Solicitors.

1. The lessee was a company called Ian and Louise Sumner Pty Ltd ('the company'). The guarantors, Ian Sumner and Louise Sumner, were directors and shareholders of the company, and were the Respondents both at first instance and on appeal.

1. The hearing of the appeal took place before us on 16 August 2012. As at the first instance hearing, the Appellant appeared in person and Mr Mahendra of counsel appeared for the Respondents.

1. In addition to the evidence admitted by the Tribunal and an outline of submissions previously filed by each of the parties, we had access to a transcript of the hearing before the Tribunal.

Relevant facts

1. The ensuing outline of relevant facts is chiefly drawn from the Tribunal's decision at first instance. But it includes a number of matters that were established in the documentary evidence put before the Tribunal but not mentioned by the Tribunal. Except where otherwise stated, all dates are in the year 2008.

1. The Lease related to retail shop premises ('the Premises') in Bathurst. It was governed by the Retail Leases Act 1994. It commenced on 1 March 2007 and was expressed to terminate on 28 February 2012. The initial rent was $48,600 per year (plus GST), payable by monthly instalments of $4,050 (plus GST). The permitted use was 'Café and Restaurant'. The business carried on by the company in the Premises ('the business') was called 'Ziegler's Café'.

1. Annexure B to the Lease contained a number of clauses of significance that were not mentioned in the Tribunal's decision. They are as follows:-

6.1 The tenant must...

6.1.2 open for business at times usual for a business of the kind conducted by the tenant;

6.1.3 keep the property clean and dispose of waste properly...

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 any way permitted under this lease without interference from the landlord, or any person claiming under the landlord or having superior title to the title of the landlord.

12.1 This lease ends -

12.1.1 on the date stated in item 3 of the schedule; or

12.1.2 if the landlord lawfully enters and takes possession of any part of the property; or

12.1.3 if the landlord lawfully demands possession of the property.

12.2 The landlord can enter and take possession of the property or demand possession of the property if -

12.2.1 the tenant has repudiated this lease; or...

12.2.3 the tenant has failed to comply with a landlord's notice under section 129 of the Conveyancing Act.

12.5 Essential terms of this lease include -

12.5.1 the obligation to pay rent not later than 14 days after the due date of each periodic instalment...

12.5.2 the obligations of the tenant in clause 5.1.2 (dealing with outgoings);

12.5.3 the obligations of the tenant in clause 6.1 (dealing with use);

12.5.4 the obligations of the tenant in clause 7 (dealing with repairs); and

12.5.5 the obligations of the tenant in clause 10 (dealing with transfer and sub-lease).

12.6 If there is a breach of an essential term the landlord can recover damages for losses over the entire period of this lease but must do every reasonable thing to mitigate those losses and try to lease the property to another tenant on reasonable terms.

12.7 The landlord can recover damages even if -

12.7.1 the landlord accepts the tenant's repudiation of this lease; or

12.7.2 the landlord ends this lease by entering and taking possession of any part of the property or by demanding possession of the property; or

12.7.3 the tenant abandons possession of the property; or

12.7.4 a surrender of this lease occurs.

13.2 The guarantor guarantees to the landlord the performance by the tenant of all the tenant's obligations (including any obligation to pay rent, outgoings or damages) under this lease, under every extension of it or under any renewal of it or under any tenancy and including obligations that are later changed or created.

13.3 If the tenant does not pay any money due under this lease, under any extension of it or under any renewal of it or under any tenancy the guarantor must pay that money to the landlord on demand even if the tenant has not tried to recover payment from the tenant.

13.5 If the tenant is insolvent and this lease or any extension or renewal of it is disclaimed the guarantor is liable to the landlord for any damage suffered by the landlord because of the disclaimer. The landlord can recover damages for losses over the entire period of this lease but must do every reasonable thing to mitigate those losses and try to lease the property to another tenant on reasonable terms.

1. On 20 June 2008, the company entered into a contract to sell the business to a company called Ilefloat Pty Ltd and Mr Ross McDonald as joint purchasers ('the purchasers'). This contract provided for completion to occur on 30 June. The Respondents, through their solicitor, asked the Appellant either to give his consent to an assignment of the Lease, or to accept a surrender of it while also agreeing to enter into a new lease with the purchasers.

1. After the Appellant had made it clear that he would not consent to an assignment unless a number of conditions were fulfilled, the Respondents and the purchasers 'moved on' (as the Tribunal expressed it at [10]) 'to contemplate a surrender of the existing lease as being a preferable course'. With this mind, the Respondents' solicitor sent various documents to the Appellant on Friday 27 June, seeking his approval.

1. At [12] and [26], the Tribunal found that the company's café did not open for business on Sunday 29 June. It based this finding on the testimony of the second Respondent, Ms Sumner. It did not refer to an assertion in the Appellant's affidavit that the business had been 'closed and vacated on or before 26 June 2008', or to an assertion in an affidavit sworn by Mr McDonald that the company closed the business on 26 June and was 'not going to trade over the weekend prior to us taking over the business on the Monday'.

1. At [12], the Tribunal also held that it was 'reasonable' for the Respondents to refrain from trading on 29 June because they anticipated that the sale of the business would proceed to completion on the following day.

1. Completion did not occur, however, on Monday 30 June, because the Appellant was not satisfied that conditions stipulated by him had been fulfilled. In a letter dated 30 June from Mr Craig Spinks, a solicitor employed in the firm Ben Gelin Solicitors and acting at that time for the Appellant, to Richard Steele & Co, who at that stage acted for the company and the Respondents, it was required, amongst other things, that the company should (a) 'restore' the ceiling and the roof of the Premises, in which a hole had been made to install a coffee roaster's flue, to 'their pristine condition', (b) clean the roof and the courtyard and (c) restore various features of the garden.

1. We will mention here that an affidavit sworn by Mr Spinks, to which this and other correspondence was annexed, was filed before the Tribunal hearing. But because he did not attend the hearing for cross-examination, only the annexures were admitted into evidence.

1. On Tuesday 1 July, the company went into voluntary liquidation. Also on that day, it paid to the Appellant the rent due for the months of July and August.

1. On Thursday 3 July, the Appellant faxed a letter to the Liquidator, Mr Christopher Chamberlain of Chamberlain's SBR, Chartered Accountants. It contained the following passage:-

I need to know, as soon as possible, what you propose to do with respect to said Lease. As the landlord of premises where the lessee is in breach of various essential terms of the lease, and thus given the possibility of my terminating the lease (or of you negotiating a termination of the lease), I have a duty to mitigate my losses, and will need to obtain a new tenant.

1. This letter also had endorsed upon it the following handwritten statement, apparently added by the Applicant: 'Also, we urgently require the keys to the premises.'

1. At [17] and [25], the Tribunal found that as at 3 July, despite the Appellant's claim to the contrary in this letter to the Liquidator, there was no evidence of any subsisting breach of the Lease by the company. Although the Appellant testified that the company had been in arrears of rent on earlier occasions, causing at least two notices of termination to be issued, it was not in arrears during June 2008 and, as just mentioned, rent for two months in advance was paid on I July.

1. In so ruling, the Tribunal did not make any mention of an allegation by Mr McDonald that a health inspector attending the Premises during its occupation by the company had found the kitchen to be in such a filthy condition that closure of the café would have to be ordered.

1. In addition, the Tribunal did not refer to two letters from Mr Spinks to Richard Steele & Co: namely, the letter of 30 June mentioned above, and a further letter dated 3 July. In this second letter, it was claimed that recent repairs to the ceiling and the roof of the Premises had not been carried out in accordance with the Appellant's requirement that a reputable tradesman approved by him be employed. The letter also repeated the Appellant's insistence that the company should attend to cleaning the roof and the courtyard and restoring various features of the garden. It contained an allegation that the company 'had not traded at all this week' and was therefore in breach of the obligation imposed by clause 6.1.2 of the Lease. It added that by virtue of clause 12.5.3 all of the obligations in clause 6.1 were 'essential terms' of the Lease. Towards the end of the letter, the following passage appeared:-

Our client reserves the right to terminate the lease for breach - continuing breach - of essential terms of the lease.

Confirmation that all the above breaches have been cured is required within the next seven (7) days. In the absence of such confirmation, the lease will be terminated.

1. As noted by the Tribunal at [28], the Appellant spoke on the telephone to Mr Brett Dodson, an employee of the Liquidator, on Friday 4 July. Mr Dodson did not testify at the Tribunal hearing.

1. According to a passage in the Appellant's affidavit to which the Tribunal did not refer in any detail, Mr Dodson stated during this conversation that the Liquidator had no intention of continuing to operate the business, but claimed an interest in some items of plant and equipment within the Premises. He invited the Appellant to make an offer for them. The Appellant told Mr Dodson that he was trying to relet the Premises as soon as possible. He also made an offer for the plant and equipment. This offer was rejected, but on 7 July a sale at a higher price was agreed on.

1. At [18], the Tribunal quoted the following sentence from the Liquidator's response, sent by fax on 4 July, to the Appellant's letter faxed on the preceding day:-

I note we have yet to formally disclaim the lease and as such put you on notice that you are not to remove or deal with any of the property without prior consent.

1. At [28 - 29], the Tribunal made the following further findings regarding the communications between the Appellant and Mr Dodson on 4 July:-

28 The Applicant also contends that the liquidator disclaimed the lease on 4 July 2008 during a telephone conversation which took place between Mr Dodson from the liquidator's office and the Applicant. This assertion stands in stark contradiction of the express advice given by the liquidator within his letter to the Applicant dated 4 July 2008 that he was yet to "formally disclaim the lease" and that the Applicant was "not to remove or deal with any of the property without prior consent". What should further be considered is the Applicant's own contemporaneous version of the telephone conversation had with Mr Dodson on 4 July 2008, which is contained within his letter of the same day:

"I note that you as the liquidator have no further interest in the lease or in the business, and I advise that I am in the process of negotiating for a new lease with prospective tenants.

It would indeed be helpful, in this regard, to have a proper Surrender of Lease executed by yourself as the Liquidator of the lessee company."

29 The Applicant does not assert within this letter, prepared on the same day that the conversation with Mr Dodson occurred, that the liquidator had advised that the lease was disclaimed; instead, the Applicant sought a surrender of the lease from the liquidator.

1. At [19], the Tribunal recorded the following two findings regarding events occurring on or shortly before 4 July. First, the second Respondent, Ms Sumner, attended the Premises on that day and discovered that she could not enter them because the locks had been changed. Secondly, the change of locks had been effected by the Appellant, who thereby took possession of the Premises, 'at least by 4 July 2008'.

1. At [21], the Tribunal indicated that it based the latter finding (which it repeated at [24]) on the following statement by the Appellant in a letter faxed on Saturday 5 July to the Liquidator:-

Based on your telephone advice, last Friday, that you disclaimed the lease, I took steps to enter the premises and take possession, and to secure them, including changing all the locks ...I am now about to grant a lease to new tenants.

1. The Tribunal reasoned that the phrase 'last Friday' could only have referred to Friday 4 July because the liquidator had only been appointed on the preceding Tuesday, 1 July.

1. The Tribunal did not mention two further items of evidence supporting its finding that the Appellant changed the locks on or before 4 July. One was an email dated Thursday 10 July from Ms Sumner to Mr Dodson, in which she stated that she and Mr Sumner had been 'locked out since last Friday'. The other was a letter dated 11 August 2008 from Mr Spinks (acting for the Appellant) to Messenger and Messenger, who had replaced Richard Steele & Co as solicitors for the company and the Respondents. This letter contained the following passage:-

With respect to the termination of the lease, it was terminated by your client on the basis of their breach of an essential term under Clause 6.1.2 of the lease. Noting the premises had been closed, clearly abandoned, for a number of days, our client conducted a company search to discover that your client was in liquidation. In order to protect his property and exercising his rights under Clause 12 our client had the locks changed on 3 July 2008 (our emphasis). The following day our client was advised by the Liquidator that the lease was disclaimed, this was confirmed in writing on 7 July 2008 and, further, the Liquidator provided to our firm a duly executed Surrender of Lease dated 1 July 2008.

1. The Appellant's letter of 5 July to the Liquidator included a further passage quoted by the Tribunal (at [22]):-

I confess that, although I am an old legal practitioner with considerable experience, I am handicapped when it comes to semantic ambiguities and word games. I do not know what the difference is between "disclaiming the lease" (as your Mr Dodson stated in our good telephone conversation last Friday) and "formally disclaiming a lease" (second paragraph in your second 4.7.08 fax).

I do not believe you can be selective as to what clauses of the lease you disclaim, or claim the benefit of. Please refer to the whole of clause 12 "Forfeiture and End of Lease" (Annexure B), of which I assume you have a copy. The tenants (Ian and Louise Sumner Pty Ltd) abandoned the business and the premises, and your office most clearly has not taken either over. The said tenants failed to take remedial action with respect to numerous breaches of essential terms of the lease, of which breaches my solicitors had given them due and repeated notices (again I assume you have copies of all such correspondence). Aside from your disclaim, the lease has been duly terminated for breach by the tenant of essential terms, and the premises have been abandoned by the tenant.

1. Annexed to Ms Sumner's statement, but not mentioned by the Tribunal in its decision, was a copy of a letter dated 19 October from Mr Dodson, on behalf of the Liquidator, to the Appellant. It included the following passage:-

I refer to your correspondence of 15th August, 2008 and advise with all due respect I have been disappointed as to how I have been misrepresented in this matter.

I have been advised by Messenger and Messenger, Solicitors, Bathurst, that your firm has advised them that I had disclaimed the company's lease on 4th July, 2008. This was never the case, and I had in fact confirmed this in writing to you on the afternoon of 4th July, 2008. In my initial correspondence that morning I had merely advised that "it was not the Liquidators intention to trade the business, and that it was our intention to provide you with a formal disclaimer of lease shortly" (emphasis in the original). I did not however at any time on the 4th July, 2008 provide any instructions whatsoever that the lease was to be disclaimed on this date.

The lease was disclaimed by the Liquidator on the afternoon of 7th July, 2008 once you had accepted our proposal re the sale of the plant and equipment.

As agreed, we then executed and returned the Surrender of Lease via correspondence dated 21st July, 2008. I note we did not date the surrender of lease, however I have been further advised by Messenger and Messenger that your firm has advised that "The Liquidator provided to our firm a duly executed Surrender of Lease dated 1 July, 2008" (emphasis in the original).

Once again this was not the case.

1. Neither the 'correspondence' of 15 August (referred to in the first paragraph of this passage) nor that of 21 July (referred to in the penultimate paragraph) was in evidence. It is not clear whether the 'correspondence' on 4 July (referred to in the second paragraph) was a letter or the telephone conversation between Mr Dodson and the Appellant on that date.

1. Annexed to Mr Spinks' affidavit was a copy of a form of Surrender of Lease, executed by the Appellant as lessor and the Liquidator as lessee. It bears the date 1 July 2008.

1. During his submissions to the Tribunal at the hearing on 23 April 2012, the Appellant confirmed that, despite the allegation to the contrary in Mr Spinks' letter of 11 August 2008 to Messenger and Messenger, the Surrender of Lease was sent to him undated. He said (Transcript, page 34, lines 10 to 14):-

The truth is the lease ceased to be of any value to the liquidator as of 1 July and the date that was put on the document, the undated document by myself or by my clerk I don't remember but I take full responsibility for that, was 1 July 2008 that has been duly registered...

1. The Appellant then indicated (at lines 14 to15) that during the second week in July he granted a lease of the Premises to the purchasers. The rent was significantly lower than had been paid by the company and there was provision for a rent-free period of one month.

1. According to the affidavit of Mr McDonald, this lease to the purchasers commenced on 7 July. On that day, he and the two directors of the other purchaser (Ilefloat Pty Ltd) took possession of the Premises.

1. In his application to the Tribunal, filed on 29 July 2011, the Appellant sought an order for payment of the following amounts by the Respondents in their capacity as guarantors: (a) the rent (including GST) for the period from September 2008 to the date of expiry of the Lease, 28 February 2012; (b) a 'capital contribution' in the sum of $3,300; (c) legal costs amounting to $819; (d) interest and (e) costs.

1. In his submissions in the appeal, the Appellant stated that the 'capital contribution' (item (b)) was for the cost of new toilets that the purchasers had asked to be installed in the Premises and that the legal costs (item (c)) related to the preparation, stamping and registration of the Surrender of Lease.

1. Against these amounts, credit was given for rent paid by the purchasers as from July 2008. The resulting total of the Appellant's claim under items (a), (b) and (c) was $32,234.73.

1. On 10 November 2011, the Respondents filed a cross application alleging unconscionable conduct on the Appellant's part. Before the Tribunal hearing commenced, however, they withdrew this claim.

The Tribunal's decision

1. The reasoning, outlined at [36 - 37], whereby the Tribunal dismissed the Appellant's claim was as follows: (a) the Appellant changed the locks and took possession of the Premises on or before 4 July 2008; (b) on that date, the company was not in breach of the Lease and had not abandoned the Premises; (b) on that date, the Liquidator had neither disclaimed nor surrendered the Lease; (d) accordingly, the Appellant's conduct in changing the locks on or before 4 July 2008 amounted to repudiation of the Lease; (e) the company elected to accept this repudiation and to treat the Lease as terminated; (f) the Appellant was therefore not entitled to maintain his claim against the Respondent guarantors for the loss of future rent, the 'capital contribution' or the legal costs.

1. With reference to its finding that as at 4 July 2008 there was no subsisting breach of the Lease by the company, the Tribunal referred, at [32], to the requirement of service of notice of breach contained in section 129(1) of the Conveyancing Act 1919, and observed that no such notice had been served by the Appellant.

1. In the following passage, at [26 - 27], the Tribunal rejected the Appellant's claim that by 4 July 2008 the company had abandoned the Premises:-

26... There is no issue that the usual café business had not been conducted at the premises since 29 June 2008. There has been no real evidence furnished by the Applicant to rebut the Respondents' evidence that this cessation of business had occurred because of an expectation that completion of sale of the business would soon be taking place. What is also not contested is the evidence of Ms Sumner that on 4 July 2008 she attended at the premises in order to open up, and then realised that the locks had been changed; such behaviour is entirely inconsistent with abandonment of the premises by the company.

27 Of course, by this time, the liquidator was responsible for the affairs of the lessee company. There is no evidence of any communication or behaviour on the part of the liquidator, nor indeed on the part of the Respondents, which could reasonably indicate that the premises had been abandoned as at 4 July 2008. The Applicant relies upon his observation when visiting the premises on 30 June 2008 that the tables and chairs were not stacked in their usual place, in submitting that the premises had then been abandoned, but this is a very weak submission in the circumstances and is not accepted.

1. The Tribunal's principal reasons for holding that, as at 4 July 2008, the Liquidator had neither disclaimed nor surrendered the Lease have already been quoted: see paragraphs [28 - 29], reproduced above at [24].

1. At [30], the Tribunal quoted a provision (section 440C) of the Corporations Act 2001 (Cth) which prohibits the owner or lessor of property 'that is used or occupied by, or in the possession of' a company under administration from taking possession of this property or otherwise recovering it without the consent of the administrator or the leave of the court. The Tribunal implicitly treated this section as confirming that the Appellant had no entitlement to take possession of the Premises on or before 4 July.

1. At [33 - 34], the Tribunal referred to a further provision (section 443B(3)) of the Corporations Act, under which an administrator of a company may give notice to a lessor of property of which the company is in possession, stating that the company does not propose to exercise rights in relation to the property. In answer to the Appellant's claim to have been told by the Liquidator that a surrender of the Lease would be given in due course, the Tribunal observed at [34] that 'this does not alter the fact that there had been no formal notice given to the Applicant as at 4 July 2008'.

1. At [35], the Tribunal rejected in the following terms a further submission by the Appellant:-

The Applicant also submits that there was an urgent necessity to have an occupant in the premises as a matter of urgency so as to protect against vandalism. The Applicant says that he was legitimately worried about the premises being unoccupied in circumstances where the liquidator had indicated to him that they were not proposing to operate the business. Accordingly, it is argued that the re-taking of possession of the premises and the installation of the new tenant were necessary and appropriate. The Tribunal accepts that there may have been some real concern that vandalism may occur, but this concern would not of itself justify the re-taking of possession of the premises in circumstances which were not justified by relevant legislation or by the terms of the existing lease agreement.

1. In ruling that the company elected to accept the Appellant's repudiation of the Lease, the Tribunal held at [36] that 'no formal notice was required to be given of this election'. It quoted the following passage from the judgment of the Court of Appeal in World Best Holdings Limited v Sarker [2010] NSWCA 24 at [69]:-

69 An election to terminate for repudiation or fundamental breach must be communicated to the guilty party by an unequivocal act or statement that the innocent party is treating the contract as at an end: Lakshmijit v Sherani [1974] AC 605, 616; The Mihalios Xilas [1979] 1 WLR 1008 HL, 1024; and Vitol SA v Norelf Ltd [1996] AC 800, 810. In the latter case Lord Steyn said:

"An act of acceptance of a repudiation requires no particular form: communication does not have to be couched in the language of acceptance. It is sufficient that the communication or conduct clearly and unequivocally conveys to the repudiating party that the aggrieved party is treating the contract as at an end."

1. The first of the written submissions put to us by the Appellant was that the Tribunal had erred through not referring at any stage to the terms of the Lease. We will deal with this submission first, before assessing the other grounds on which he claimed that the Tribunal's decision should be set aside.

Failure to mention the terms of the Lease

1. The Appellant pointed out that the Tribunal did not at any stage refer to provisions of the Lease that in his submission were of considerable importance. He identified clause 13.5 as the provision of 'paramount importance and relevance'. He also referred to clauses 6.1.2, 6.1.3, 12.5.3, 12.6 and 12.7.

1. We agree with the Appellant that, in order to investigate thoroughly the rights and liabilities of the parties in the distinctly unusual circumstances of this case, it was necessary to take careful account of the provisions of the Lease, including clause 13.5, that defined the scope of the Respondents' obligations as guarantors. The other clauses identified by the Appellant should also have been mentioned.

1. Although our conclusion, on grounds explained below, is that the Tribunal's failure to refer to these provisions is not enough to justify setting aside its decision, we regard this failure as an error of law. It is for this reason that in the foregoing summary of the relevant facts we have included evidence to which the Tribunal also did not refer. Only after taking into account this additional evidence, as well as the evidence outlined by the Tribunal and its findings based on that evidence, can we be satisfied as to the appropriateness of the Tribunal's decision.

The date on which the locks were changed

1. In his written submissions in the appeal, the Appellant alleged as follows: (a) having discovered on or about 2 July that the company was in liquidation, he asked his wife to make arrangements with locksmiths for the locks to be changed; (b) they did not actually change the locks until after she had contacted them again; and (c) that the date of the change was 9 July. He referred also to having been uncertain about the date at the Tribunal hearing, at which time he believed that the date was 7 July.

1. At the hearing of the appeal, the Appellant submitted that the Tribunal's finding as to the date when the locks were changed was based on the testimony of Ms Sumner and that, in circumstances outlined below, he had not had a sufficient opportunity to test her evidence by cross-examination.

1. These submissions are unconvincing. As the Tribunal pointed out at [21], quoting the relevant passage, the Appellant stated in a letter faxed to the Liquidator on 5 July (a Saturday) that he 'took steps', based on telephone advice from the Liquidator 'last Friday' (meaning 4 July) 'to enter the premises, and to secure them, including changing all the locks'. In addition, as we pointed out above, Mr Spinks, in the course of acting for the Appellant, said in a letter of 11 August to Messenger and Messenger that the date of change was 3 July. On grounds set out below, we reject the Appellant's claim to have been denied a proper opportunity to cross-examine Ms Sumner.

1. The Appellant's challenge to the Tribunal's finding on this matter - i.e., that the Appellant changed the locks and took possession of the Premises 'at least by 4 July' - manifestly fails.

Alleged breaches of 'essential terms' of the Lease

1. As indicated above, the grounds for the Tribunal's decision in favour of the Respondents included a finding that at the time (on or shortly before 4 July) when the Appellant changed the locks, the company was not in breach of the Lease. But in making this finding, the Tribunal did not make any mention of letters written by the Appellant's solicitor, Mr Spinks, to the Respondents solicitors on 30 June and 3 July (see above at [13] and [20]).

1. In these letters, it was alleged that during the period immediately before 4 July the company had breached two terms of the Lease that according to clause 12.5.3 were 'essential terms'. These were clause 6.1.2, requiring the company to be 'open for business' at 'usual' times, and clause 6.1.3, requiring it to keep the premises clean.

1. In his written submissions in the appeal, the Appellant relied on this evidence to support a submission that the company had indeed breached these essential terms and that he was therefore entitled to take possession of the Premises and to recover damages under clause 12.6 for 'losses over the entire period of this lease'. He contested the proposition (stated by the Tribunal at [32]) that he could not retake possession without first serving a notice under section 129(1) of the Conveyancing Act 1919 by asking (rhetorically) in his written submissions how he could have done so, given that the company was 'no longer capable of responding' and that the Liquidator had 'already advised, unambiguously, that he would not reopen the business or conduct any business there'. At the hearing, however, the Appellant did not press this argument strongly.

1. Our conclusions on this matter are as follows. First, even if the breaches alleged by Mr Spinks did occur and were breaches of 'essential terms', they could not provide grounds for re-entering the Premises unless a notice was first served under section 129(1). As Handley JA said in World Best Holdings Limited v Sarker [2010] NSWCA 24 at [44] -

A landlord cannot contract out of s 129(1) by making any or all of the tenant's covenants essential terms, and providing that any breach or fundamental breach thereof will give rise to a right of termination. Section 129 exists for the protection of tenants, and subs (10) provides that it "shall have effect notwithstanding any stipulation to the contrary".

1. Secondly, even if (as might be argued) the letter written by Mr Spinks (on 3 July) was sufficient to constitute a notice under section 129(1), no 'reasonable time' was allowed to the company to remedy the specified breaches. The lockout occurred on the same day or the next day.

Alleged abandonment of the Premises

1. As we understood the Appellant's submissions, the alleged abandonment of the Premises from a date as early as 26 June was not merely a matter relied on by him in arguing (as just outlined) that the company breached essential terms of the Lease. He also treated it as an independent justification for his repossession of the Premises on or shortly before 4 July. He submitted further that the Liquidator's avowed intention not to continue running the business amounted to further evidence of abandonment.

1. The Tribunal found however that, as Ms Sumner alleged, the company did not cease trading until 29 June. In our opinion, it was entirely open to the Tribunal to accept her testimony on this matter in preference to that of the Appellant and of Mr McDonald. Furthermore, the Liquidator's decision to cease operating the business did not amount to abandonment of the Premises. Even if the 'property' to which Mr Dodson referred in his letter faxed to the Appellant on 4 July was the plant and equipment in the Premises, not the Premises themselves, this letter made it plain that the Liquidator was retaining, for the time being, the company's rights under the Lease.

1. For these reasons, we reject the Appellant's claim that, contrary to the Tribunal's finding, the company, through its directors and/or the Liquidator, abandoned the Premises on or before 4 July.

The termination of the Lease

1. The submissions put forward by the parties canvassed no less than four alternative modes of termination of the Lease: (1) termination by the Appellant on the ground of breaches by the company and/or abandonment of the Premises; (2) disclaimer by the Liquidator; (3) surrender by the Liquidator, which the Appellant accepted; and (4) repudiation by the Appellant, which the company accepted. We will investigate each of these possibilities in turn.

1. Abandonment. For reasons already given, we agree with the Tribunal's rejection of the first of these alternatives.

1. Disclaimer by the Liquidator. This alternative was favoured by the Appellant, with the important rider that, according to him, it took place on 4 July during his conversation with Mr Dodson. But we agree with the Tribunal that this proposition must also be rejected.

1. As the Tribunal pointed out at [28], Mr Dodson expressly denied having disclaimed the Lease during his conversation with the Appellant on 4 July and the Appellant himself, in a letter written on the same day, sought a surrender, not a disclaimer, from the Liquidator. Furthermore, section 568 of the Corporations Act 2001 (Cth), in the form that it took during July 2008, stated expressly that any disclaimer by a liquidator must be by 'signed writing'.

1. In his letter of 19 October to the Appellant, Mr Dodson did however advise that the Lease was 'formally disclaimed by the Liquidator on the afternoon of 7th July, 2008'. But in the same letter, he wrote: 'As agreed, we then executed and returned the Surrender of Lease via correspondence dated 21st July 2008.' This Surrender was subsequently registered.

1. Under section 568C(3) of the Corporations Act, in the form that it took during July 2008, a disclaimer took effect either on the day when the liquidator 'lodged notice' of it, or (in certain circumstances) at some later date. In section 9, 'lodge' was defined to involve lodgement with ASIC (the Australian Securities and Investments Commission). There is no evidence as to whether the disclaimer in this case was ever 'lodged'. It is possible that it was not, since the Liquidator, as just stated, prepared and executed a Surrender of Lease and sent it to the Appellant for execution by him and registration.

1. By virtue of reasoning outlined below, the Appellant, in seeking to make good his claim for damages against the Respondent guarantors, argued that the Lease came to an end through the process of disclaimer. But for the reasons that we have just given, he has failed to discharge the onus that lies on to him to prove this component of his case. It has not been demonstrated that any disclaimer signed by the Liquidator on 7 July became effective under the Corporations Act.

1. Surrender. We turn now to the third alternative. From the point of view of registered title, the company's leasehold interest revested in the Appellant on registration of the Surrender of Lease. As between the parties, the execution of this document by the Appellant, following receipt of it from the Liquidator, was sufficient to bring about the termination of the Lease, if termination had not already occurred.

1. In his written submissions to us, the Appellant stated that this document was provided to him by the Liquidator 'in mid-July 2008' and was 'a properly executed Surrender of Lease, dated 1.7.08'. In so far as this statement implied that the Liquidator executed the Surrender on 1 July, it was misleading. If its aim was to furnish support for a submission that the surrender was effective as from 1 July, it was unsuccessful.

1. As stated in Mr Dodson's letter of 19 October, the Liquidator executed the Surrender of Lease at some time between 7 and 21 July and sent it in undated form to the Appellant on 21 July, for execution by him. The reason why the date of execution shown on the document was 1 July was that the Appellant or his clerk entered it in the space provided.

1. Our conclusion on this specific question is that, unless the Lease was terminated by the fourth of the alternative modes that we are discussing - i.e., repudiation by the Appellant, which the company accepted - it came to an end at the time, on or after 21 July, when the Appellant executed the Surrender. If, in the alternative, the Surrender should be deemed to have taken effect between the parties when the Liquidator signed it, the date of termination was a day between 7 and 21 July.

1. Repudiation by the Appellant, which the company accepted. We have endorsed the Tribunal's findings that (a) the Appellant, on or before 4 July, locked the company out of the Premises and regained possession of them, and (b) at that time, he had no entitlement under the Lease to do so.

1. We endorse also the Tribunal's ruling that the Appellant, by this conduct, repudiated the Lease. It revealed an intention on his part to bring the Lease to an end. This interpretation of what he did was confirmed by his reletting of the Premises to the purchasers. The lease to them commenced only a few days later, on 7 July.

1. The Appellant's re-entry into the Premises was patently a serious and substantial infringement of the landlord's covenant for quiet enjoyment contained in clause 11.1. It has been held more than once (e.g. by Young J in Lagouvardis v Brett and Janet Cottee Pty Ltd (1994) NSW ConvR 55-714 (BC9402842) and by Allsop J, as he then was, in Byrnes v Jokona Pty Ltd [2002] FCA 41; see at [70] to [80]) that such a breach of this covenant will, or at least might, constitute repudiation. In a decision of the Court of Appeal, Todbern Pty Ltd v Taormina International Pty Ltd (1990) 5 BPR 11,1173 at 11,176 (BC9002319 at 51), Powell JA expressed his agreement with the view that -

... when the landlord has evicted the tenant, or his conduct has been so gross as to render it virtually impossible for the tenant to continue in possession... a breach of the covenant for quiet enjoyment may amount to a repudiation...

1. In this context, we would refer also to the decision of the Full Court of the Supreme Court of South Australia in Belperio v Linehaul Holdings Pty Ltd (2004) 89SASR 185; [2004] SASC 238. At [74 - 82], the Court confirmed a decision in which the District Court, without referring to the landlord's covenant for quiet enjoyment, held that a lessor who changed the locks on the demised premises, prevented the tenants from gaining access to them and served a notice to quit thereby repudiated the lease.

1. The final step in the Tribunal's reasoning comprised its statements, at [36], that following the repudiation of the Lease by the Appellant, 'the company elected to accept the repudiation and to treat the lease as having been terminated' and that 'no formal notice was required to be given of this election'. The Tribunal then cited a passage from World Best Holdings Limited v Sarker [2010] NSWCA 24 at [69], in which the Court of Appeal stated as follows: 'An election to terminate for repudiation or fundamental breach must be communicated to the guilty party by an unequivocal act or statement that the innocent party is treating the contract as at an end.'

1. The Tribunal's decision on this matter calls for careful consideration. Because we had some concerns about it at the appeal hearing, we invited the parties to advise us in supplementary written submissions of any relevant authorities of which they were aware. Neither party was able to assist us in this way.

1. At the hearing, the Appellant submitted that as from 1 July, when the company went into liquidation, only the Liquidator had the capacity to accept a repudiation and that as matters transpired the Liquidator never disputed or took issue with the Appellant's conduct in repossessing the Premises and granting a new lease to the purchasers. The Appellant relied on the following facts: (a) all that the Liquidator was concerned to do was initially to retain possession of, then in due course to sell, the plant and equipment; and (b) soon after the sale had been effected, an executed Surrender of Lease was provided.

1. In submitting that the Liquidator did accept the Appellant's repudiation of the Lease, Mr Mahendra relied principally on Mr Dodson's statements, in his letter of 19 October 2008, evincing disapproval of the Appellant's conduct in representing to Messenger and Messenger that the Liquidator had disclaimed the Lease on or indeed before 4 July.

1. Following our own investigation of the applicable law, our conclusion is as follows. Because the Liquidator, after being advised on 5 July that the Appellant had entered the Premises and changed the locks, took no steps to indicate to the Appellant on the company's behalf that it wished to affirm the Lease, the repudiation must be taken to have been accepted. Three cases that we have already cited support this conclusion.

1. In Lagouvardis v Brett and Janet Cottee Pty Ltd (1994) NSW ConvR 55-714 (BC9402842), the lessees carried on a business which, to the lessors' knowledge, was very sensitive to interfering factors such as dust. The lessors allowed large quantities of dust to enter the demised premises from a nearby carpark that they owned. Young J upheld a decision of the Local Court that this amounted to a repudiation of the lease and that the lessors' claim for rent and outgoings should therefore be dismissed. On the matter of acceptance of the repudiation, he simply observed as follows: 'The tenants accepted the repudiation by removing themselves from the premises.'

1. In Byrnes v Jokona Pty Ltd [2002] FCA 41 at [1], Allsop J gave the following outline of the relevant facts:-

1 This matter concerns a failed business venture in Liverpool in Sydney. Briefly, and by way of introduction, the first and second applicants (who were shareholders in the third applicant) signed a lease of property granted by the respondent. The lease was for a basement of a building at 2-20 Orange Grove Road, Liverpool. The applicants desired to set up a business in this basement in the running of a "paintball centre". This was a place at which people could come and play organised games firing coloured gelatinous balls of paint using high pressure air guns which require a police supervised firearms licence. A considerable amount of effort was expended by the applicants in putting into some repair and appropriate condition the basement (which was, if not derelict, then at least in extremely poor condition) and the surrounding areas, which were in a shoddy state... Thirteen months after the lease took effect, and under a year after commencing the business, the applicants walked away from the lease claiming a repudiation by the respondent landlord. The claims made by them, which are founded upon breaches of the lease, breaches of an alleged collateral contract, estoppel and the Trades Practices Act 1974 (Cth), arise from what they say was a range of interruptions to, and interferences with, the possession of the demised premises, the surrounding land and the business. These interruptions and interferences, it was said, so impeded the commercial use of the premises for the desired purposes that the business failed. The respondent has cross-claimed against the first and second applicants for the balance of the rent and removal expenses.

1. At [82] to [105], his Honour examined in turn each of what he called ten 'categories of complaint' alleging breach of the covenant for quiet enjoyment. Although in most of these categories he dismissed the lessees' complaints, he concluded that the instances of breach of this covenant that he found proven were sufficiently serious to entitle the lessees to terminate the lease. At [105], he said:-

105 It is now necessary to assess the consequences of these breaches of covenant. On 15 January 1996 Mr Byrnes paid the last instalment of rent. It would appear that this paid the applicants up to 15 January 1996. The business had effectively closed in the second half of November. The premises were vacated on 15 January 1996. The applicants were entitled to terminate the lease when they did by abandoning it on 15 January 1996. The claim by the respondent for the balance of the rent and other matters therefore fails. In those circumstances the cross claim must be dismissed with costs.

1. In Belperio v Linehaul Holdings Pty Ltd (2004) 89SASR 185; [2004] SASC 238, the lessee, following eviction from the premises in circumstances held to amount to repudiation by the lessor, made a payment of overdue rent and returned to the premises in order to clean them (as required by the lease) and retrieve its goods and chattels. It did not resume any business activities. Giving the judgment of the Full Court, Besanko J (at [85 - 89]) upheld the finding of the District Court that this course of conduct denoted acceptance of the lessor's repudiation of the lease.

1. These three cases demonstrate that lessees who are entitled to terminate their leases on the ground of repudiation by the lessor will sufficiently accepted the repudiation if they (a) 'remove themselves from' the premises, (b) abandon the premises, or (c) cease to carry on business in the premises and return to them only in order to clean them and retrieve their goods and chattels.

1. The underlying principle, in our opinion, is that when a lessee, such as the company in this case, has become entitled to repudiate the lease on account of being wrongfully evicted, it sufficiently accepts the repudiation if it refrains from any conduct evincing a desire to resume possession.

1. On this basis, we conclude, as did the Tribunal, that the company accepted the Appellant's repudiation of the Lease and that the Lease was accordingly terminated. This should be taken to have occurred on a date, soon after 5 July 2008, when the Liquidator's failure to act in response to the Appellant's letter of that date advising that he had taken possession made it implicitly clear that the Liquidator would not seek to resume possession.

1. This termination of the Lease took place before the Appellant executed and registered the Surrender of Lease. As between the parties, that document merely confirmed that the Lease was at an end.

The liability of the Respondent guarantors

1. The Appellant argued that the presence of clause 13.5 in the Lease was sufficient to determine in his favour the claim that he had made against the Respondents for lost rent, the 'capital contribution' of $3,300 and legal costs amounting to $819. He maintained that the conditions for its operation - that the tenant was insolvent and the Lease was disclaimed - were clearly satisfied. The Respondents were therefore liable to him, in their capacity as guarantors, for all losses caused to him by the disclaimer over 'the entire period' of the Lease.

1. We have concluded, however, that the Lease was not brought to an end by the process of disclaimer. Instead, termination occurred because the Appellant repudiated it, on or shortly before 4 July 2008, and the company accepted this repudiation, on or shortly after 5 July. If this is not correct, the terminating event was the Appellant's execution of the Surrender, on or soon after 21 July 2008, or possibly the Liquidator's execution of it between 7 and 21 July.

1. Whichever of these two forms of termination occurred - acceptance of the Appellant's repudiation or surrender - the company's future monetary obligations under the Lease came to an end. Most significantly, this was the case with its obligation to pay rent once the period covered by the rent payment made on 1 July 2008 had elapsed - i.e., as from September 2008. It was also the case with regard to the legal costs associated with the Surrender, amounting to $819, for which the Appellant claimed reimbursement.

1. The proposition that an accepted repudiation has this effect receives direct support from the last two sentences of the passage (paragraph [101]) quoted above at [86] from Byrnes v Jokona Pty Ltd [2002] FCA 41.

1. Authority for the principle that, in the absence of express agreement to the contrary, a surrender of a lease releases the tenant, along with any sureties, from future liabilities may be found in Torminster Properties Ltd v Green [1983] 2 All ER 457 at 462 and in earlier cases cited in that decision. Clause 12.7.4 of the Lease, to which the Appellant referred in his submissions, does not oust the operation of this principle, because the scope of that clause is confined to claims for damages under clause 12.6 on the ground of breach by the tenant of an 'essential term'.

1. As to the Appellant's claim for a 'capital contribution' of $3,300, which according to his submissions related to the cost of installing new toilets in the Premises pursuant to a request by the purchasers, we were not referred to any evidence that would substantiate such a claim, other than a brief statement in Mr McDonald's affidavit. This is not sufficient to make good the Appellant's assertion that the company, at the time when he regained possession, was under a liability to pay this amount.

1. Under clause 13.2 of the Lease, the Respondents guaranteed the performance of the company's obligations as tenant, including the obligation to pay rent. Under clause 13.3, they guaranteed the performance of its obligation to 'pay any money due under the lease'. Except under clause 13.5, which we have held to be inapplicable, the scope of their liability was as defined in these two clauses. No obligations upon the company such as these clauses described were unperformed at the time when the Lease was terminated and no such obligations arose thereafter.

1. Subject to some remaining considerations, which we will now discuss, the outcome of this reasoning is that, as the Tribunal decided, the Appellant is not entitled to claim any amount from the Respondents under the guarantee contained in the Lease.

Other grounds of appeal

1. The Appellant put forward five more grounds of appeal, which may be dealt with briefly.

1. He argued first that section 440C of the Corporations Act 2001 (Cth), which the Tribunal quoted in its decision, did not apply to the circumstances of the case. We agree, but for a different reason to that advanced by him. Our reason is that this section applies to companies in administration, and the company in this case went into the wholly distinct process of liquidation. The same may be said in relation to section 443B, which the Tribunal also quoted.

1. Secondly, the Appellant alleged that at the Tribunal hearing the presiding Judicial Member denied him procedural fairness by unjustifiably cutting short his cross-examination of Ms Sumner. As Mr Mahendra pointed out, however, the relevant ruling by the Judicial Member followed an objection by Mr Mahendra on the ground of relevance and a rejoinder by the Appellant that his question went to credit. When the Judicial Member then said 'Well I don't allow questions...', the Appellant immediately withdrew his questions, adding 'there's not a problem'. These events, which are set out in the Transcript of the Tribunal hearing between p 25, line 40 and p 26, line 9, provide no basis for finding that procedural fairness was denied.

1. Thirdly, the Appellant claimed that Ms Sumner's evidence was unconvincing in a number of respects. This, of itself, would not provide a reason for holding that the Tribunal should not have accepted any of this evidence.

1. Fourthly, the Appellant pointed to the Tribunal's observation (at [10]) that when he refused consent, before 30 June 2008, to the proposed assignment of the Lease to the purchasers, he did so on grounds exceeding those permitted by section 39 of the Retail Leases Act. This may have been irrelevant to the issues to be decided, but that of itself does not bring the Tribunal's decision into doubt.

1. Fifth and finally, the Appellant referred to comments made by the Judicial Member at or near the commencement of the hearing, suggesting that the Member was not familiar at this stage with the documentary material previously filed. The Appellant referred also to an observation in the decision itself (at [7]) that there was 'a relatively narrow band of factual and legal issues to be determined'. Once again, these matters fall well short of showing that the decision is open to question.

Our orders

1. For the foregoing reasons, the appeal must be dismissed.

1. In response to directions in the Tribunal's decision, the parties filed submissions relating to the costs of the hearing. But because an appeal was on foot, the Tribunal did not determine this matter. Under section 88(4) of the Administrative Decisions Tribunal Act 1997, it is open to us to determine it, as well as the costs of the appeal.

1. We direct as follows. Any application by the Respondents for the costs of the appeal must be filed and served within 35 days, along with supporting submissions and any additional submissions they may wish to make as to the costs of the Tribunal hearing. Any submissions in reply by the Appellant must be filed and served within a further 28 days. These matters of costs will then be determined 'on the papers', pursuant to section 76 of the Administrative Decisions Tribunal Act 1997, unless the Appeal Panel decides that a hearing is required.

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Decision last updated: 12 December 2012