Hemer Pty Ltd v Benni

[2011] SASCFC 35

SUPREME COURT OF SOUTH AUSTRALIA

(Full Court)

HEMER PTY LTD v BENNI & ORS

[2011] SASCFC 35

Judgment of The Full Court

(The Honourable Chief Justice Doyle, The Honourable Justice Gray and The Honourable Justice Sulan)

29 April 2011

LANDLORD AND TENANT - COVENANTS - ACTIONS FOR BREACH OF COVENANT - GENERALLY

A ninety nine year lease was entered into in 1962 and subsequently registered – the parcel of land subject to the lease was divided into two parcels – as a result of the division there were two lessors and a lessee – the second covenant of the lease stipulated: ‘(2) If demanded by the lessor rates and taxes proportional to the land herein leased are to be the responsibility of the lessee’ – lessors demanded from the lessee payment in respect of rates and taxes charged on or against their land equal to the proportion that the leased area bore to the area of the whole allotment – lessee refused to pay on the basis that the rates and taxes should be payable under the lease on the proportion that the unimproved value of the leased area bears to the unimproved value of the whole allotment – whether the rates and taxes under the second covenant were to be payable based on a proportion of area or site value – whether trial Judge erred in finding that rates and taxes were payable by the lessee under the second covenant based on a proportion of area.

Held (Gray J with Sulan J concurring; Doyle CJ dissenting): that rates and taxes are payable under the second covenant based on the site value of the leased land, as determined from time to time by the Valuer-General.

LANDLORD AND TENANT - TERMINATION OF THE TENANCY - FORFEITURE - RELIEF AGAINST FORFEITURE - RELIEF UNDER STATUTE - NOTICE BEFORE RE-ENTRY

Lessors sent to the lessee letters demanding payment for rates and taxes under the second covenant of the lease – whether the letters satisfied the requirements of notice under s 10 of the Landlord and Tenant Act 1936 (SA) – whether trial Judge erred in finding that the letters satisfied the requirements of s 10 of the Landlord and Tenant Act 1936 (SA).

Held (Gray J with Sulan J concurring; Doyle CJ dissenting): appeal allowed - that the letters did not satisfy the requirements of s 10 of the Landlord and Tenant Act 1936 (SA) – it would be contrary to the scheme of the legislation to permit re-entry without reasonable notice from the lessor to the lessee of the lessor's intention - there was no valid re-entry.

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - REPUDIATION AND NON-PERFORMANCE - ELECTION AND RESCISSION

Two lessors separately wrote to the lessee demanding payment under the second covenant – after a period of time elapsed the lessors again wrote separately to the lessee demanding payment under the second covenant – one lessor wrote a third time demanding payment under the second covenant – that same lessor instituted proceedings in the Adelaide Magistrates Court claiming recovery for the first two payments demanded by the lessor – whether the institution of the Magistrates Court proceedings constituted an election to enforce the second covenant for the payment of contributions towards rates and taxes, rather than to re-enter and forfeit the lease – whether trial Judge erred in finding that the institution of proceedings did not amount to an election – whether subsequent demands amounted to a binding election not to re-enter and forfeit the lease for earlier non-payment of rates and taxes under the second covenant.

Held (Doyle CJ with Sulan J concurring; Gray J dissenting): that neither lessor elected not to enforce the right of re-entry and forfeiture.

LANDLORD AND TENANT - TERMINATION OF THE TENANCY - FORFEITURE - RELIEF AGAINST FORFEITURE - RELIEF UNDER STATUTE - RELIEF BY COURT

The trial Judge refused to grant relief against forfeiture – whether trial Judge erred in refusing to grant relief against forfeiture.

Held (Gray J with Sulan J concurring; Doyle CJ dissenting) - as the lessor's re-entry was not valid, there was no forfeiture - accordingly, there was no need to grant relief against forfeiture.

Landlord and Tenant Act 1936 (SA) s 10, s 10(1), s 11, s 12(2), s 12(5); Real Property Act 1886 (SA) s 94, s 125(c), s 126, referred to.
McDrury v Luporini [2000] 1 NZLR 652, applied.
Ex parte Dally-Watkins; Re Wilson (1955) 72 WN 454; Sargent v ASL Developments Limited (1974) 131 CLR 634; Finley v Russell-Jones (1949) 49 SR (NSW) 96; Segal Securities Ltd v Thoseny [1963] 1 QB 887; David Blackstone Ltd v Burnetts (West End) Ltd [1973] 1 WLR 1487; Lidsdale Nominees Pty Ltd v Elkhardadly [1979] VR 84; Gillen v Laffer [1924] SASR 170; Laffer v Gillen [1924] SASR 514; Gillen v Laffer (1925) 37 CLR 210; Laffer v Gillen (1927) 40 CLR 86, discussed.
Commissioner of State Revenue (Vic) v Price Brent Services Pty Ltd [1995] 2 VR 582; Fox v Jolly [1916] 1 AC 1; Johnson v Senes & Berger (1961) 78 WN (NSW) 861; Ex parte Taylor [1980] Qd R 253; Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; Matthews v Smallwood [1910] 1 Ch 777; Rosa Investments Pty Ltd v Spencer Shier Pty Ltd [1965] VR 97; Ex parte Whelan [1986] 1 QR 500; Jennings Industries Ltd v Commonwealth of Australia (1983) 69 FLR 189, considered.

HEMER PTY LTD v BENNI & ORS
[2011] SASCFC 35

Full Court:  Doyle CJ, Gray and Sulan JJ

1. DOYLE CJ:          The appellant Hemer Pty Ltd (Hemer) made a claim for orders  declaring that the respondents’ purported forfeiture by re-entry on land it leases (being part of their respective parcels of land) was not validly effected.  The hearing before a Judge proceeded on the basis that Hemer was in breach of a covenant of each lease:  Hemer Pty Ltd v Benni & Ors [2010] SASC 242 at [23] and at [29]. In the alternative Hemer claimed relief against forfeiture by the respondents. The Judge held that the re-entry by each of the respondents effected a forfeiture of the relevant lease. The Judge refused to grant relief against forfeiture.

2. Hemer appeals against this decision.  Hemer has also applied for permission to appeal against the Judge’s decision on costs.

3. The issues raised by Hemer on appeal are these. Were the amounts demanded by each of the respondents under the relevant lease calculated in the manner provided for by the lease? Did the respondents give a notice complying with the requirements of s 10 of the Landlord and Tenant Act 1936 (SA) (the LTA) before re-entering? Did the respondents act in such a way as to give rise to a binding election to maintain and enforce each lease, rather than forfeit them by re-entry? Were the purported re-entries valid and effective? Did the Judge err in refusing to grant relief against forfeiture?

   Summary of the facts

4. By and large the facts are not disputed.  In the following summary I will focus on events that are now common ground.  There were some conversations between the parties that were the subject of dispute.  There is no challenge to the Judge’s findings about them.  By and large I have not found it necessary to consider matters other than those that are common ground.

5. Mr Turner and Mr Chapman each owned land abutting Sunnyside Road Glen Osmond, a suburb of Adelaide.  The twists and turns in Sunnyside Road are such that their respective frontages to Sunnyside Road were not adjacent.  The roughly northern boundary of Mr Turner’s land abutted the roughly southern boundary of Mr Chapman’s land.  Mr Turner’s land sloped fairly steeply from Sunnyside Road down towards Mr Chapman’s land.  The leased land was on the lower side of Mr Turner’s land.  It was an area running along the southern boundary of Mr Turner’s land.  In effect, it provided a buffer (on Mr Turner’s land) between his land and Mr Chapman’s land.

6. The lease between Mr Turner and Mr Chapman was entered into in 1962.  It was in the form of a Memorandum of Lease in registrable form.  It was short.  It was in due course registered.  The lease was for a term of 99 years.  The annual rental is one shilling (10 cents) “payable on demand”.  There are only two covenants in the lease.  They are as follows:

   THE LESSEE HEREBY AGREES THAT:

   (1)The said land hereby leased shall be used wholly and solely for the purpose of a garden and for no other purpose whatsoever.

   (2)If demanded by the lessor rates and taxes proportional to the land herein leased are to be the responsibility of the lessee.

7. At the time of the grant of the lease Mr Turner’s land, including the leased land, was unimproved.  The vegetation comprised mainly grasses and olive trees.  The case proceeded on the basis that in the lease “garden” included leaving the land in the state in which it was.  There has been no suggestion that anything in the nature of a formal garden was called for.

8. In September 2006 Hemer purchased Mr Chapman’s land.  Mr Horbelt has been treated as representing Hemer, and I will do the same.  A house had been built on Mr Chapman’s land.  By this time Mr Turner’s land had been divided into two allotments.  Ms Benni and Mr Ridge had been owners of one allotment since 30 August 2000.  In the proceedings Ms Benni has been treated as representing the two owners of this allotment, and I will do so also.  Ms Collins purchased the other allotment in September 2007.  When Hemer acquired the land no buildings had been erected on Ms Benni’s allotment or Ms Collins’ allotment.  Since then Ms Benni has erected a house on her allotment.  It is unclear to me how Mr Turner’s land came to be divided as it was, the lease to Mr Chapman being in respect of part of each of the allotments created by the division.  The case appears to have proceeded before the Judge on the basis that nothing turns on this.  Ms Benni and Mr Chapman were treated as bound by the lease, and Hemer was treated as entitled to enforce the lease as against each of them.

9. During the course of submissions Mr Slattery QC, counsel for Hemer, argued that an election by Ms Collins to treat the lease as continuing on foot, in a manner inconsistent with a later forfeiture, would also bind Ms Benni.  This seemed to be based on the proposition that there was but one lease, and therefore the conduct of Ms Collins would bind Ms Benni.  This point does not appear to have been taken before the Judge.  The case proceeded on the basis that there are two separate leases.  I would not permit Hemer to depart from that basis now.  If it were to do so, fairness would require that Ms Benni and Ms Collins be given the opportunity to re-open the case to explore and explain the circumstances under which Mr Turner’s land was divided into two allotments.

10. On 19 November 2007 Ms Collins wrote to Mr Horbelt.  She referred to the lease.  She enclosed a copy.  She stated that:

    The percentage of rates payable to you [sic] is 40.2% for both Council Rates and SA Water Rates.

    She said that she had paid the water rates for the quarter October-December 2007 and asked Mr Horbelt to “reimburse me for your share”.  Although no specific amount is referred to in the letter, the parties have treated this as a demand for $60.04.  The amount claimed represented 40.2 per cent of a quarterly supply charge, a quarterly charge based on property value, and an amount identified as “Save the River Murray Levy”.

11. It is common ground that the amount claimed by Ms Collins was based on the proportion that the area of land the subject of the lease bore to the area of the allotment as a whole.  Whether that is what the lease contemplates is the subject of dispute, and was argued before the Judge.

12. Mr Horbelt did not make payment.  On 6 February 2008 Ms Collins wrote again.  She referred to the previous letter, and identified the amount claimed in that letter as $60.04.  She said:

    Since that time, I have paid the second quarterly instalment and your share is the same amount, being $60.04.  Total outstanding now is $120.08. 

    She enclosed copies of the invoices.  This was a demand for a contribution to the water rates for the quarter ending March 2008.  The rates paid by Ms Collins comprised the same components as in the previous quarter.

13. Mr Horbelt did not pay.  On 27 February 2008 Ms Collins issued proceedings in the Adelaide Magistrates Court against Hemer.  She completed the claim herself.  She claimed $120.08 plus the filing fee.  The Particulars of Claim identified this amount as being for water rates.  The Particulars of Claim also stated:

    All future rates and taxes applicable to this lease must be paid by [sic] owner of 61 Sunnyside Rd, Glen Osmond (lessee).

14. On 18 March 2008 Hemer filed a Defence.  The defence stated that Hemer did not have access to and did not use any mains water on the land “… and is therefore not liable to pay for water rates”.  In the alternative the Defence claimed that water rates should be apportioned either by reference to the value of the land (presumably meaning the proportion that the value of the leased land bore to the allotment as a whole) or by reference to “… actual water usage of the lessee”.  The Defence also contained a denial that Hemer was indebted to Ms Collins in any amount.

15. On 14 July 2008 Ms Collins wrote to Hemer again.  She now made demand for $180.12, stating that she had paid water rates for the quarter ending on 30 June 2008.  The letter was headed “Final Notice” and demanded payment within 14 days. 

16. Ms Collins claimed that she re-entered the portion of her land the subject of the lease on 29 July 2008, 15 days after the letter just referred to.  In her affidavit, tendered at the hearing before the Judge, she said:

    … on 29 July 2008 I re-entered that part of the Third Defendant’s land then subject to the lease and took possession thereof …

    She said that since then she had frequently entered upon the land for a variety of purposes.  She had carried out bushfire prevention work on the land.  At the trial a statutory declaration was tendered from a person who claimed to have accompanied Ms Collins on 29 July 2008.  This person stated that she saw Ms Collins enter upon the land and that Ms Collins remained on the land for some time.  We were told in argument that the assertions by Ms Collins that she re-entered were not challenged at trial, in the sense that she was not cross-examined about the manner in which she did so.

17. On 7 August 2008 Ms Collins made an application to the Registrar-General under s 126 of the Real Property Act 1886 (SA) (the RPA) requesting that the Registrar note the re-entry upon the land. The Registrar-General, relying on a statutory declaration lodged by Ms Collins deposing to the above facts, duly registered the re-entry on 22 September 2008. The effect of s 126 is that upon the re-entry being noted in the Register Book, “… the estate of the lessee in such land shall thereupon determine …”. There is no suggestion that Mr Horbelt was aware of the proposed re-entry, nor of it having been carried out.

18. On 24 September 2008 Ms Collins wrote to the Adelaide Magistrates Court, and sent a copy of her letter to Mr Horbelt.  She stated that she wished to withdraw her action because the re-entry on the land the subject of the lease had been registered by the Lands Titles Office.

19. On 22 October 2008 Mr Horbelt’s solicitors wrote to Ms Collins asserting that the application to the Registrar-General contained a misstatement, in asserting that she had re-entered the land on 29 July and had remained in possession since then.  The letter threatened proceedings.

20. On 16 December 2008 Hemer commenced its proceedings.

21. I turn now to the facts relating to Ms Benni.

22. Ms Benni wrote to Mr Horbelt on 6 February 2008 enclosing an invoice for $294.88.  This was said to be in respect of the period from 8 September 2006 to 30 June 2007.  The invoice with the letter identified this as 22 per cent of council rates in respect of the land, of an emergency services levy charged by the Government on the land, of water rates charged by the Government on the land and of land tax charged by the Government on the land.  In the case of council rates, emergency services levy and land tax the amount appears to be the amount payable for the full year, apportioned as to the day when Hemer was registered as proprietor.  The water rates appear to represent the rates for three quarters of the year, similarly apportioned.  The invoice stated that the payment was due by 22 February 2008. 

23. On 14 July 2008 Ms Benni sent a further invoice to Hemer.  This was in respect of the period 1 July 2007 to 30 June 2008.  The amount claimed was $289.68.  It appears to comprise 22 per cent of the amount paid by Ms Benni by way of council rates, water rates and emergency services levy for the year referred to.

24. In an affidavit tendered before the Judge, Ms Benni stated that she re‑entered the land the subject of the lease on 30 July 2008 and “took possession thereof” that day.  She said she had been in possession since that day.  She said that on her land near the boundary with the leased land there was an old wooden fence and that she knocked down some of it in August 2008.  She said that after 30 July 2008 she had frequently entered on the land for a variety of purposes connected with building works on the other part of her land, bushfire prevention and other matters.

25. On 8 August 2008 Ms Benni also applied to the Registrar-General to have an entry of the re-entry made on her Certificate of Title pursuant to s 126 of the RPA. On 22 September 2008 the Registrar-General did so.

26. On 15 December 2008 solicitors for Hemer wrote separately to Ms Collins and to Ms Benni.  They referred to proposed court proceedings, and denied the validity of the re-entry.  With the letter to Ms Collins the solicitors enclosed a cheque from Hemer for $180.12, being the amount demanded in her invoice of 14 July 2008.  In a letter to Ms Benni the solicitors enclosed a cheque from Hemer for $294.88 said to be the amount demanded in her invoice of 14 July 2008.  That was the amount demanded in respect of the year ending 30 June 2007, and is a little more than the amount demanded in respect of the year ended 30 June 2008, but is well short of the total claimed by Ms Benni.  In each case the offer of payment was made “under protest” and without any admission of liability.  Each cheque was returned. 

27. The trial before the Judge proceeded on affidavit evidence, supplementary oral evidence being given by Mr Horbelt, Ms Collins and Ms Benni. 

28. By and large the outcome of the proceedings turns on the documentary evidence. However, the Judge made some findings based in part on the oral evidence. The Judge found that at no time was Mr Horbelt prepared to pay anything towards rates and taxes on the land: [35]. The Judge rejected a claim by Mr Horbelt that his attitude was “based on a principled preparedness to pay the appropriate proportion of rates and taxes, based on the unimproved value of the leased land”: [36]. The Judge found that his attitude was that he was not liable to make any payment. The Judge found that the evidence of Ms Collins and the evidence of Ms Benni was reliable, and that each of them was an honest witness. The Judge found that neither of them informed Mr Horbelt of their intention to re-enter nor of the actual re-entry. The Judge said that this was of no moment, “bearing in mind that the land was unimproved bush land which was rarely entered by anyone”: [50]. The Judge found that until the letters of 15 December 2008 enclosing cheques were sent, there was no indication from Mr Horbelt that he was prepared to pay any amount under the lease. She rejected a submission that Mr Horbelt was confused about his liability: [57]. She found that his aim was to negotiate an arrangement under which Ms Benni and Ms Collins would transfer all or part of the leased land to him, as had happened with another person in the same situation as them: [58].

    Were the demands for rent?

1. The lease is brief. It is set out in full in the Judge’s reasons at [3]. There is no proviso for re-entry and forfeiture. Ms Collins and Ms Benni must rely on a statutory power to re-enter and forfeit. Section 125(c) of the RPA provides as follows:

   125In every lease there shall also be implied the following powers in the lessor, that is to say:

   …

   (c)     that in case the rent, or any part thereof, shall be in arrear for the space of three months, although no demand shall have been made thereof, or in case default shall be made in the fulfilment of any covenant, whether expressed or implied in such lease, on the part of the lessee, and shall be continued for the space of three months, or in case the repairs required by such notice as aforesaid shall not have been completed within the time therein specified, it shall be lawful for the lessor to re-enter upon and take possession of the leased premises.

2. Under that provision the power to re-enter is conditional on rent being in arrears for three months, or a default in fulfilment of a covenant continuing for three months. Because there is no provision for re-entry and forfeiture in the lease, Ms Collins and Ms Benni rely upon the exercise of the power conferred by s 125 of the RPA. But s 10 of the LTA must also be taken into account. That section provides:

   10 – No re-entry till notice to tenant to remedy breach

   A right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant or condition in the lease shall not be enforceable by action or otherwise, unless and until—

   (a)     the lessor serves on the lessee a notice specifying the particular breach complained of, and, if the breach is capable of remedy, requiring the lessee to remedy the breach, and in any case requiring the lessee to make compensation in money for the breach; and

   (b)     the lessee fails within a reasonable time thereafter to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money to the satisfaction of the lessor for the breach.

   By s 12(2) of the LTA, this section applies to a right of re-entry or forfeiture pursuant to the RPA. But by s 12(5) of the LTA, s 10 does not “… affect the law relating to re-entry and forfeiture for non-payment of rent”. Accordingly, if the demand and later re-entry by Ms Collins and Ms Benni related to non‑payment of rent, there was no duty imposed by s 10 of the LTA to serve notice on Hemer specifying the breach relied on. If the demand and re-entry were not in relation to non-payment of rent, a notice complying with s 10 of the LTA had to be served.

3. The case was argued at trial and on appeal on the basis that the demand and re-entry were not made for rent, and accordingly that notice for the purposes of s 10(1) of the LTA had to be given. Whether a monetary payment of the kind in question, that is, a contribution to outgoings, is a payment of “rent” can be a difficult question to decide. The lease does not describe the payment as rent. Nor is the payment towards rates and taxes linked in any way to the payment of the nominal rent. Although the point was not argued, I am inclined to think that the demands and re-entries were not relating to non-payment of rent. The thorough reasons of Brooking J in Commissioner of State Revenue (Vic) v Price Brent Services Pty Ltd [1995] 2 VR 582 support that conclusion. In any event, the case should be decided on the basis upon which it has been argued.

   The right to re-enter and forfeit

4. The right to re-enter the premises and to forfeit the lease for failure to make payment in respect of rates and taxes arose once the lessor demanded payment (see the second covenant above), once default on the part of Hemer had continued for three months (s 125(c) of the RPA), and after a notice meeting the requirements of s 10 of the LTA had been served on Hemer and Hemer had failed within a reasonable time to remedy the breach of covenant. In the circumstances, a few days was a sufficient time to allow for Hemer to remedy a breach of covenant.

   Are water rates recoverable under the covenant?

5. The only demand made by Ms Collins was for a contribution to water and sewer rates, and to the “Save the River Murray Levy” of $8.20, which amount is included in the account for water and sewer rates.  During the course of the appeal Mr Slattery QC, counsel for Hemer, suggested that water rates might not fall within the expression “rates and taxes” in the second covenant.  This was because there was no water connection to the leased land, and because it could not have been contemplated in 1962 that the tenant of the leased land would be liable to contribute to the cost of water used by the lessor on the balance of the allotment.  Mr Slattery pointed to the fact that in the Magistrates Court proceedings Hemer had denied any liability to pay water rates.

6. This point was not raised in terms before the Judge.  The Judge did not decide it.  In fact, Hemer conceded before the Judge that it was in breach of the lease when Ms Collins issued proceedings out of the Magistrates Court.  I referred earlier to the passages in the Judge’s reasons recording this.  No challenge was made before the Judge to this component of Ms Benni’s claim.

7. I would not permit Hemer to change its position now.  A proper consideration of the issue could well involve evidence about the circumstances when the lease was granted, about how water rates were charged at the time and are charged now.  It would be neither just to the respondents nor sensible to allow Hemer now to change its stance.

   How is the liability to be calculated?

8. As I understand it, Ms Collins and Ms Benni claimed that proportion of the rates and taxes charged on or against their land that was equal to the proportion that the leased area bore to the area of the whole allotment.  They denied that it made any difference whether a particular rate or tax was based on unimproved value of the land, improved value or consumption of water.  Mr Slattery submits that the correct approach is to determine the proportion that the unimproved value of the leased land bears to the unimproved value of the whole allotment.  He submits that it would be unjust for the lessee to be responsible for a proportion of rates and taxes increased (beyond a rate or tax on unimproved value) by improvements made by the lessor of no benefit to the lessee.  As to this argument, the Judge said:

   [64]In my view the argument of the defendants is to be preferred.  It has the advantage of relative simplicity, both in interpretation and in application.  It is clear that rates and taxes are levied over the whole of any particular allotment, irrespective of which part of an allotment, if any, bears improvements.  The use of the word “proportional” is readily understood to involve the ratio of the area of land leased to the area retained by the lessor.  The expression used by the draftsman is apt to require a determination of the fraction of the rates and taxes which are attributable to the leased land.  The only sensible way of determining that proportion is, in my mind, by a comparison of area, as opposed to value.

9. I agree with the Judge that the language used in the lease suggests a comparison by reference to area.  I recognise the risk of assuming the answer to the question raised by the second covenant, but to my mind the expression “proportional to the land herein leased” suggests a proportion based on area.  If the proportion was based on the value of the leased land compared with the value of the allotment as a whole, I would have expected the drafter to refer to value.  The circumstance that rates and taxes were (as far as I am aware) and are generally assessed or levied against an allotment as a whole supports this conclusion.  On Mr Slattery’s approach a valuation of the leased land would have to be made each year, or at least from time to time, and it would have to be a determination of the unimproved value.  If the parties had contemplated this I would have expected some provision to be made for the valuation process.  This is a contextual circumstance supporting the Judge’s conclusion.

10. It follows that the demands made were for amounts that were payable by Hemer under the second covenant.

    Was the required notice given?

11. The Judge found that the notice required by s 10(1) of the LTA was given in each case.

12. The Judge based this conclusion on the letters that Ms Collins and Ms Benni sent to Hemer. Mr Slattery submits that to comply with s 10 of the LTA a document relied upon must indicate or warn that unless the alleged default is remedied, re-entry might or will occur. There is no reference in any of the letters to that possibility. Ms Collins’ letter of 6 February 2008 referred to possible proceedings before the Magistrates Court. It called for payment within seven days, which Mr Slattery submits was not a reasonable time. Ms Benni’s invoice of 6 February 2008 allowed until 22 February 2008 for payment, while her letter of 14 July 2008 called for payment within 14 days.

13. I agree with the Judge that the letters met the requirements of s 10 of the LTA. It was clear that each letter or invoice was calling for a payment under the second covenant in the lease. Mr Horbelt knew this. Mr Slattery did not suggest otherwise. His submissions go to the form of the notice. The alleged breach was clearly identified in each case – the failure to make payment. The request or demand for payment amounted to a requirement to remedy the breach. It was clear what Hemer was called upon to do. Having regard to the modest amounts involved, and to the background, I consider that the time allowed to remedy the breach was a reasonable time.

14. There was no need to state that Ms Collins or Ms Benni might or would re‑enter the leased land and forfeit the lease if Hemer did not pay. No authority in relation to the requirements of s 10 of the LTA (as distinct from similar provisions in other States) was brought to our attention. There are points to be made on either side, but in the end I agree with the Judge.

15. First, s 10 of the LTA does not require in terms that the lessor indicate that the lessor might re-enter and forfeit the lease. Second, unlike the legislation in some other States, there is no statutory or prescribed form for the notice. In some States there is such a form, and it requires the lessor to give notice that it will be entitled to re-enter or forfeit if the lessee does not comply with the notice. I consider that the key requirement in s 10 is that the notice bring to the lessee’s attention the covenant allegedly breached (this was done), the nature of the breach (this was self evident), and that the notice give an opportunity to the lessee to remedy the breach: Fox v Jolly [1916] 1 AC 1 at 8-9 Lord Buckmaster LC, at 17-18 Lord Atkinson, at 22 Lord Parmoor. In that case the notice stated that the landlord would re-enter and claim damages, and so I bear in mind that the speeches must be read in light of that. In Ex parte Dally-Watkins; Re Wilson (1955) 72 WN 454 the reasons of Street CJ emphasise the requirement to identify the breach complained of, and the requirement to remedy the breach if capable of remedy, within a reasonable time. The statutory form of notice contained a requirement that the lessor warn that the lessor would be entitled to re-enter or forfeit if the lessee failed to comply with the notice. The document relied on gave that warning. So, once again the reasons must be read in that light. I refer also to Johnson v Senes & Berger (1961) 78 WN (NSW) 861 at 862-863 and to Ex parte Taylor [1980] Qd R 253 at 256-258. Each decision emphasises the importance of the requirement that the statutory form of notice warn the lessee that the lessor will be entitled to re-enter or forfeit the lease.

16. In the decided cases the requirement that the lessor state or indicate the lessor’s intention to re-enter and forfeit derives from the prescribed form of notice. It is not found in the equivalent of s 10 of the LTA. Nor, to my mind, is that requirement implicit in s 10. Accordingly, I conclude that there is no such requirement in this case, and that the notice given by Ms Collins and Ms Benni was valid.

    Election as between remedies

17. Mr Slattery submits that the Judge erred in failing to decide that Ms Collins had, by instituting proceedings in the Magistrates Court, elected to keep the lease on foot and enforce the covenant for the payment of contributions towards rates and taxes, rather than to re-enter and forfeit the lease.  Accordingly, in his submission, it was not open to Ms Collins to re-enter and forfeit the lease.  As the argument unfolded it included a submission that certain demands for payment by Ms Collins and Ms Benni amounted to a binding election.  This argument is not referred to in the Judge’s reasons, and my impression is that it was not put to the Judge.  However, the relevant evidence is before the Court.

18. As noted earlier in my reasons, Mr Slattery also argued that an election by Ms Collins bound Ms Benni, because there was only one lease.  For the reasons that I indicated, I consider that it is too late to advance this argument.  The case has proceeded on the basis that there are two leases, and I would not permit Hemer to depart from that basis.

19. In Segal Securities Ltd v Thoseby [1963] 1 QB 887 Sachs J said at 897:

    When one approaches the law relating to waiver of forfeiture, one comes upon a field – one might say a minefield – in which it is necessary to tread with diffidence and warily.  That is to no small degree due to the number of points in that field that are of a highly technical nature, originating in the days before the court was able to give relief, if at all, with such freedom as it can nowadays.

    I agree with that sentiment. 

20. Mr Slattery based his submissions on statements made in Sargent v ASL Developments Limited (1974) 131 CLR 634. That was a case involving contractual rights, and the alternatives of treating a contract as subsisting or electing to rescind. In relation to the question of election, Stephen J said at 645-646:

    In the present appeals I conclude that, contrary to the appellants' contentions, all that need be established in order for the doctrine of election to apply is knowledge by the vendors of the facts giving rise to inconsistent legal rights; the appellants are to be taken to know of their rights of rescission conferred by cl. 16 and, of course, of their right to enforce the contracts according to their terms. If they then knew of the relevant facts giving rise to the rights of rescission, that is, the existence of a planning scheme affecting the lands sold, that is enough to invoke the doctrine. Their own interpretation or understanding of the nature or extent of their contractual rights will be irrelevant, so that it matters not at all whether they were aware of the existence of cl. 16 or of its effect as it came to be enunciated in (…); it is enough that they knew of facts which have brought cl. 16, as so interpreted, into operation.

    The words or conduct ordinarily required to constitute an election must be unequivocal in the sense that it is consistent only with the exercise of one of the two sets of rights and inconsistent with the exercise of the other; thus for a lessor to continue to receive rent under a lease will be consistent only with his rights as lessor and inconsistent with the exercise of a right to determine the lease (…). However, less unequivocal conduct, only providing some evidence of an election, may suffice if coupled with actual knowledge of the right of election (…). There need be no expressed intention to elect, nor will an express disclaimer of such an intention be of any avail in preserving one right if in fact there be an exercise of another inconsistent right (…). For an election there need be no actual, subjective intention to elect (…), an election is the effect which the law attributes to conduct justifiable only if such an election had been made (…).

    Citations omitted

    At 655-656 Mason J said:

    It will make for greater certainty, therefore, if the present cases are regarded as cases of election. A person is said to have a right of election when events occur which enable him to exercise alternative and inconsistent rights, i.e. when he has the right to determine an estate or terminate a contract for breach of covenant or contract and the alternative right to insist on the continuation of the estate or the performance of the contract. It matters not whether the right to terminate the contract is conferred by the contract or arises at common law for fundamental breach — in each instance the alternative right to insist on performance creates a right of election.

    Essential to the making of an election is communication to the party affected by words or conduct of the choice thereby made and it is accepted that once an election is made it cannot be retracted (…). No doubt this rule has been adopted in the interests of certainty and because it has been thought to be fair as between the parties that the person affected is entitled to know where he stands and that the person electing should not have the opportunity of changing his election and subjecting his adversary to different obligations.

    A person confronted with a choice between the exercise of alternative and inconsistent rights is not bound to elect at once. He may keep the question open, so long as he does not affirm the contract or continuance of the estate and so long as the delay does not cause prejudice to the other side. An election takes place when the conduct of the party is such that it would be justifiable only if an election had been made one way or the other (…). So, words or conduct which do not constitute the exercise of a right conferred by or under a contract and merely involve a recognition of the contract may not amount to an election to affirm the contract.

    Citations omitted

    He added at 658:

    If a party to a contract, aware of a breach going to the root of the contract, or of other circumstances entitling him to terminate the contract, though unaware of the existence of the right to terminate the contract, exercises rights under the contract, he must be held to have made a binding election to affirm. Such conduct is justifiable only on the footing that an election has been made to affirm the contract; the conduct is adverse to the other party and may therefore be considered unequivocal in its effect.

21. More recently, in Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570 Gummow, Hayne and Kiefel JJ said at [56]:

    [56]In this Court an intentional act, done with knowledge, whereby a person abandons a right by acting in a manner inconsistent with that right has been described as the “waiver” of that right. But as later demonstrated, many such cases are applications of the doctrine of election between inconsistent rights. The same may be said of election between inconsistent remedies such as damages and an account of profits.

    Citations omitted

22. The issue raised under this heading is whether Ms Collins and Ms Benni had rights that were alternative and inconsistent, and whether having such rights they acted in a manner consistent only with the exercise of one of those rights, and inconsistent with the exercise of the other.  Applied to the facts, the question is whether what they did to recover money payable under the second covenant was inconsistent with the exercise of a right to re-enter and thereby determine the lease.  If it was, then they lost the right to re-enter and determine the lease, whether they intended to do that or not. 

23. There is an aspect of this on which the cases conflict. It is whether election arises only as between alternative and inconsistent rights that can be exercised at the moment in question, or whether an election may arise as between the exercise of a contingent right and a right that is not contingent. Ms Collins and Ms Benni made demands for payment. They were not entitled to re-enter and forfeit the lease until Hemer had failed to comply with the demand for a period of three months, and unless and until a notice for the purposes of s 10 of the LTA was given. For the purposes of the principles relating to election, did they have alternative and inconsistent rights pending the expiry of the three months and the expiry of the time allowed by any notice under s 10, or did they have alternative and inconsistent rights only once the relevant time had elapsed and they were entitled in law to re-enter?

1. Some cases suggest that election will arise during the period when the right to re-enter can be described as contingent upon compliance with statutory formalities.  A more recent decision, which I prefer, holds that the doctrine of election does not come into play until the right to re-enter has actually arisen.

2. Matthews v Smallwood [1910] 1 Ch 777 is often cited on the topic of election or waiver as it is called in that case. The main focus on that case was on the element of knowledge on the part of the lessor. Parker J said at 786:

   Waiver of a right of re-entry can only occur where the lessor, with knowledge of the facts upon which his right to re-enter arises, does some unequivocal act recognizing the continued existence of the lease.  It is not enough that he should do the act which recognizes, or appears to recognize, the continued existence of the lease, unless, at the time when the act is done, he has knowledge of the facts under which, or from which, his right of entry arose.

   At 787 he referred to:

   … knowledge of the circumstances from which the right of re-entry arises at the time when that act is performed.

   That suggests to me that he contemplates an existing entitlement to re‑enter, not an entitlement contingent upon compliance with statutory requirements.  But the point is not beyond argument.

3. Finley v Russell-Jones (1949) 49 SR (NSW) 96 was concerned with the exercise of a statutory notice to quit. Jordan CJ, speaking for the Court, said at 101:

   When an event occurs which gives a lessor a legal right to give his tenant a valid notice to quit, the legal effect of the acceptance by the lessor of rent accruing due after the occurrence depends upon the circumstances.  At common law, if the event comes to the knowledge of the lessor, and he accepts rent accruing due after he became possessed of the knowledge, this operates as an irrevocable waiver of his right to determine the tenancy: by accepting rent he is estopped from enforcing the legal right which he would otherwise possess …

   Citation omitted

   I understand his Honour to be referring to the acceptance of rent that accrued due after the occurrence in question.  Implicit in that is the further proposition that a demand for or acceptance of rent that fell due before the occurrence giving rise to a right to give notice to quit would not amount to an election.  The right to rent accrued before the notice is given is not alternative to the right to give notice to quit.  The rights are cumulative.  However, his Honour says nothing about conduct while the notice is running. 

4. Segal (above) was concerned with a continuing breach relating to the use of the premises.  On 8 June 1962 the landlord served notice requiring the tenant to remedy the breach within 28 days.  By letter dated 25 June the landlord, by a letter headed “Without Prejudice”, demanded the rent payable in advance for the next ensuing quarter.  Sachs J held that the demand could operate only as a waiver of past breaches of covenant known to a landlord at the time, and not as a waiver of breaches that occurred between the date of the demand for rent and the issue of the writ for possession.  Accordingly, there was no waiver or election.  But his Lordship’s reasons (at 901-902) suggest that a demand for rent due in the future, made while the statutory period of default is still running, will give rise to a waiver.  That, however, was not essential to the decision.

5. David Blackstone Ltd v Burnetts (West End) Ltd [1973] 1 WLR 1487 involved a subletting without the consent of the landlord. The landlord’s solicitors learned of this in early December 1971. Initially, there was some uncertainty as to the situation. On 3 December a clerk employed by the lessor made demand for rent due in advance on 25 December 1971. On 14 December the lessor served notice on the lessee identifying the breach and calling for it to be remedied. On 29 December 1971 the lessee sent a cheque for the rent, but that was returned. The question was whether the demand for future rent, if made with knowledge of a breach which would entitle the lessor to forfeit, constituted an election to continue the lease. The point that the right to re-enter was contingent until the statutory notice was served and not complied with does not appear to have been argued. Swanwick J noted that there was no direct authority on point: at 1496. He concluded at 1498:

   My view, both on principle and on such persuasive authority as has been cited to me, is that an unambiguous demand for future rent in advance such as was made here does in law amount to an election and does constitute a waiver if, at the time when it is made, the landlord has sufficient knowledge of the facts to put him to his election.  To my perhaps simple mind there is a fundamental inconsistency between contending that a lease has been determined and demanding rent on the basis of its future continuance.

   His Lordship refers to the lease as having been determined, although at the time of the demand for rent the statutory notice had not been given.  He relied on the decision in Segal and noted that it referred to a demand for rent during the period of the statutory notice.

6. In Lidsdale Nominees Pty Ltd v Elkharadly [1979] VR 84 the lessee was in breach of a covenant relating to the use of the premises. The landlord served notice requiring the lessee to stop the activity complained of within 15 days. The notice stated that the lessor intended to re-enter and forfeit the lease. Then a further notice was given. Some payments of rent were made, but the breach was a continuing breach. At the beginning of March 1978 the lessee forwarded rent for the month of March. The lessor’s solicitors accepted the rent “on account of mesne profits”, stating that they had instructions to terminate the lease. They had already issued a writ for possession, but had not served it. Lush J held that until the writ was served, the lease had not been forfeited. The acceptance of the payment between issue of the writ and service of the writ amounted to an election or waiver, because the money was tendered as rent, and the lessor could not change the basis of the tender. In the end, this case throws no light on the issue before me.

7. The point now under consideration arose before the Court of Appeal of the Supreme Court of New Zealand in McDrury v Luporini [2000] 1 NZLR 652. This was a case in which there was an alleged breach of a lease of a farm in that the lessee failed to apply the required amount of fertilizer. The breaches of the lease in this respect were treated as non-recurring breaches. A notice specifying the breach and calling for it to be remedied was served in July 1996. It gave three months for compliance. The lessor continued to accept rent until re-entry in October 1996. The issue that arose was whether, until the lessor had an unconditional right to forfeit, a choice had to be made between that right and the alternative right of keeping the lease alive: at [44]. Their Honours considered the matter as an issue of principle, and also by reference to the case law. They referred to Segal and to Blackstone v Burnetts.  Their Honours concluded:

   [46]It follows that acceptance of rent in the period prior to the issue of statutory notice cannot amount to an election not to forfeit.  This is because no unconditional right to forfeit has yet arisen.  Whether acceptance of rent in these circumstances may be evidence upon which an estoppel could be asserted does not arise upon this appeal as no question of estoppel was argued before us.  The Luporinis’ acceptance of rent during the running of the statutory notice cannot, for similar reasons, be regarded as an election not to exercise their contingent remedy of forfeiture.  Equally, there can be no question of an estoppel during this period.  The very service of the notice makes it clear that the lessors were asserting a right to forfeit if the notice was not complied with.

   [47]As a matter of policy we consider this approach creates a fair balance between the competing interests of lessors and lessees in present circumstances. The lessee knows full well, following service of a statutory notice, that the lessor is complaining of a breach and giving the lessee a chance to remedy it. The lessee cannot reasonably assert that the lessor’s acceptance of rent shows an unequivocal intention not to forfeit. The very purpose of serving the notice is to give a right to forfeit on non-fulfilment. The lessor should not be put in the position of having to decline to accept rent during the currency of the notice because the rent may never be forthcoming if the lessee fails to comply and the lease is forfeited. The lessee gets the benefit of the continuation of the lease during the notice period and should be obliged to pay rent in the ordinary way for that benefit. It is hardly logical in such circumstances to hold that the lessor has lost the right to forfeit by accepting what the lessee is obliged to pay for the extra time which the statute allows for the lessee to remedy the breach. To argue that the receipt of rent during the running of the notice could amount to waiver would also, in our view, be contrary to the general scheme of the notice provisions. The Property Law Act differentiates between a breach by non-payment of rent and other types of breaches. It can be inferred that Parliament saw breach by non-payment of rent as more serious and entitling the landlord to more immediate action. It would be contrary to this view to suggest that, under s 118, a landlord must go without rental payments during the currency of the notice.

   There is no authority binding on the point in issue in McDrury.  I prefer the approach taken by their Honours in that case, and propose to adopt it.  I now turn to the facts.

8. On 19 November 2007 Ms Collins made a request for payment. The letter was courteously expressed. I do not read it as a notice for the purposes of s 10. Nevertheless, now that payment had been called for, Hemer was in default once a reasonable (and short) time for compliance had passed.

9. Ms Collins wrote again on 6 February 2008. She did not then have an entitlement to re-enter and forfeit. The default in payment under the covenant had not continued for three months, and notice for the purposes of s 10 of the LTA had not been given. Accordingly, applying McDrury, the further demand for payment for the quarter ending 31 March 2008 did not amount to an election not to forfeit the lease. The letter of 6 February 2008 can be treated as a notice for the purposes of s 10 of the LTA.

10. Ms Collins was in a position to exercise the right of re-entry (in respect of the first breach of covenant) as from about 19 February 2008.  By then, time to comply with the notice given on 6 February 2008 had expired, and the failure to comply with the covenant had continued for more than three months. 

11. The Judge did not say why the institution of proceedings in the Magistrates Court on 27 February 2008 did not amount to an election.  However, in my opinion it did not.  The claim was for recovery of the first two payments demanded by Ms Collins.  Ms Collins was entitled to be paid those amounts, even had she re-entered on the first possible date.  There is no inconsistency between an action to recover those amounts, and a decision to re-enter and forfeit.  The entitlement to payment arose before the right to re‑enter vested in her.  Insistence upon payment in those circumstances is not inconsistent with a later decision to re-enter.  Insistence upon payment does not reflect or assume the continuing operation of the lease.  It is based on an earlier accrued right.

12. The claim on the notice of claim that “[a]ll future rates and taxes applicable to this lease must be paid by [sic] owner of 61 Sunnyside Road, Glen Osmond (lessee)” does not alter the position.  To the extent it is a claim for a declaration, the claim should have been dismissed.  The Magistrates Court could do no more than determine Ms Collins’ entitlement to the amounts already demanded.

13. On 14 July 2008 Ms Collins wrote to Hemer again.  By then Hemer had failed for more than three months to make payment of each of the first two payments demanded by Ms Collins.  But Ms Collins now, in this “final notice”, allowed a further 14 days for payment.  Having done that, it seems to me that she was obliged to wait for the 14 days to elapse before re-entering.  As it happens, in the same letter she made a further demand for payment in respect of the quarter ended 30 June 2008.  At the time of making this demand (14 July 2008), but for the decision to allow a further 14 days, she would have had an unconditional right to re-enter and forfeit the lease in respect of the first payment, originally demanded on 19 November 2007.  She had an unconditional right to forfeit, and on the approach taken in McDrury the further demand, in respect of a period that began after she had an unconditional right to forfeit, could amount to an election to treat the lease as remaining on foot for the purposes of a further demand for rent.  On the other hand, having given Hemer a further 14 days to make payment, she was no longer in a position to re-enter until the 14 days had expired.  Does this mean that there is no election because when she made the third demand for payment she did not have an unconditional right to re-enter and forfeit?

14. The Judge appears to have made her decision in favour of Ms Collins on the basis that the relevant demands were made on 19 November 2007 and 6 February 2008, that on 14 July 2008 Ms Collins gave a valid notice for the purposes of s 10 of the LTA, and that after the expiry of 14 days she was entitled to re-enter. The Judge does not appear to have addressed the point that on 14 July 2008 there was no need to give that further notice under the LTA, and that on the same day Ms Collins made a further demand for payment.

15. We now have technicality upon technicality.  No answer will be entirely satisfactory.  To my mind there is no injustice in treating Ms Collins, for the purposes of the principle stated in McDrury, as not being entitled to re-enter and forfeit at the time she made the third demand for payment.  She was not so entitled because she allowed a further 14 days for payment of the first two amounts claimed.  On that, admittedly technical and somewhat unsatisfactory basis, I conclude that Ms Collins did not elect to maintain the lease in force as an alternative to re-entry and forfeiture. 

16. I turn now to Ms Benni.  She first called for payment on 6 February 2008, in respect of the period ending 30 June 2007.  She called for payment by 22 February 2008.  Default in compliance would have continued for three months as at late May 2008.

17. On 14 July 2008 Ms Benni wrote to Hemer in terms that amounted to a notice for the purposes of s 10 of the LTA. She called for payment within 14 days. Accordingly, she was not entitled to re-enter until 28 July 2008. In the same letter she made a further demand for payment, but when she made that demand she did not have an unconditional right to re-enter, and accordingly that demand did not amount to an election to keep the lease on foot. That further demand could not support a right to re-enter until three months elapsed. But she does not need to rely on that demand.

18. I conclude that neither Ms Collins nor Ms Benni are to be treated as having elected not to enforce the right of re-entry and forfeiture.

    Was the re-entry valid and effective?

19. What amounts to a sufficient act of re-entry in a given case will always depend on the facts.  The relevant facts will include the nature of the land or premises, whether the lessee is in actual or physical occupation at the time, whether the lessee resists the taking of possession, the manner in which the premises are enclosed and are or can be secured, and so on.  In the present case the leased land was a relatively small area of sloping scrub, abutting the land owned by Hemer.  On the evidence, prior to the re-entry, it was rarely entered by anyone.  It appears that the boundary between the leased land and the balance of the land owned by Ms Collins and Ms Benni was ill defined.  There were no gates or obvious entry points.  There was nothing to lock up or close.  Hemer was not in possession of the leased land in the sense of being physically present, through Mr Horbelt, at any relevant time.  There was no question of having to put Mr Horbelt off the leased land.

20. In Rosa Investments Pty Ltd v Spencer Shier Pty Ltd [1965] VR 97 Sholl J reviewed the authorities, although in a different context and with reference to that context. Sholl J distinguished between cases in which reliance is placed on the commencement of an action for possession and cases in which there is (at 105):

    … something amounting to a demand on the demised premises, on the lessee or the person in possession, for immediate possession thereof, whether by verbal request or by service of clear written notice. 

    The authorities are also considered by the Full Court of the Supreme Court of Queensland in Ex parte Whelan [1986] 1 QR 500. Thomas J, speaking for the Court, denied that re-entry required “physical dispossession or … the issue of a writ”: at 509. He said that “an unequivocal demand communicated to the lessee will suffice”, but there is no suggestion of that here.

21. The complaint by Mr Slattery is that the Judge did not identify an unequivocal act of the respondents indicating an intention to end the lease.  In the present case both Ms Collins and Ms Benni stated in an affidavit tendered at the hearing that they had re-entered the premises.  Ms Collins tendered a supporting statutory declaration from a witness.  Their statements are tendentious, because they assert that they re-entered the premises.  Almost no supporting detail is given.  But when they gave evidence neither of them was cross-examined on this claim.  It was open to counsel for Hemer to challenge the assertion of re-entry, and to explore what that amounted to.  That was not done.  The Judge accepted their evidence.

22. I acknowledge that more could easily have been done than was done.  Ms Collins and Ms Benni could have informed Mr Horbelt of the re-entry.  They could have put some notices on the land stating that they had re-entered, and claimed to be in possession of the leased land, although it is unlikely that that would ever have come to Mr Horbelt’s attention.

23. In these circumstances, the claim that in fact they re-entered was not challenged.  There was no need for the Judge to identify the unequivocal act constituting re-entry.

24. Be that as it may, and once again having regard to the manner in which the case was conducted at trial, I conclude that the Judge’s finding of re-entry should not be disturbed.

    Relief against forfeiture

25. The Judge refused to grant relief against forfeiture.  The Judge referred to the following matters.  Hemer denied liability to make any payment under the second covenant until December 2008 when its solicitors forwarded payment “under protest”.  That stance was unreasonable.  The Judge rejected a claim that Hemer misapprehended its obligations.  The Judge found that Mr Horbelt was manoeuvring for the chance of improving his position by acquiring some or all of the leased land.  With those observations I agree.  The Judge said that the Defence that he filed in the Magistrates Court showed “belligerence”.  I respectfully disagree with that, but it is true that it maintains an unreasonable denial of all liability.  During the hearing before the Judge, Hemer tendered a written undertaken to pay “the agreed proportion” of rates and taxes.  The Judge said the undertaking was “problematical”.  I respectfully disagree.  It appears satisfactory to me, it not being suggested that the reference to the “agreed proportion” meant only what Hemer might agree to pay.  In any event, the terms for the grant of relief can and would ordinarily require an undertaking to make payments in the future on the basis determined by the Court.  That basis is, subject to more precise calculation, on the basis of area.  The terms of relief would also ensure that Hemer undertook that it was liable for rates and taxes of the kind already claimed by Ms Collins and Ms Benni.  There is no reason to think that Hemer would be unable to make payment in the future.  The amount is not substantial.  There is no reason to think that Mr Horbelt would refuse to make payments in the future.

1. Relief against forfeiture is not granted as a matter of course. The Court has a wide power under s 11 of the LTA.

2. The lease is for a long term.  Forfeiture of the lease involves a substantial loss of amenity on the part of Hemer.  The default by Hemer involved modest amounts, and it is within the power of the Court to require full payment with interest.  Accordingly, no loss should be suffered by Ms Collins or Ms Benni.  I agree that Mr Horbelt has behaved in a difficult and annoying fashion.  On the other hand, that is in the past.  The offer of the undertaking is some indication of a change of attitude.

3. I respectfully conclude that the Judge has been unduly influenced by Mr Horbelt’s attitude prior to the hearing.  I consider that the case is one in which a proper exercise of the Court’s power calls for a grant of relief against forfeiture on terms of the kind indicated above.  Those terms would have to recognise that while Hemer is not entitled to dispute the basis of payment, or the liability to pay rates and taxes of the kind claimed, there could be a reasonable basis for argument in the future about fine details.  I would hear the parties on the question of costs, but my tentative opinion is that Hemer should pay the costs of the proceedings because it has been found to be in breach of the leases, because the re‑entry was valid, and because Hemer maintained to the very end its denial of breach and its claim that it did not require relief against forfeiture.

4. There is a further issue. Section 126 of the RPA provides:

   126 – Registrar-General to note particulars of re-entry in Register Book

   The Registrar-General, upon proof to his satisfaction of re-entry by the lessor, in manner prescribed by the lease, or under the power in the third subsection of the last preceding section provided for, or of recovery of possession by a lessor, by any proceeding in law, shall note the same by entry in the Register Book, and the estate of the lessee in such land shall thereupon determine, but without releasing him from his liability in respect of the breach of any covenant in such lease expressed or implied.

5. In my summary of the facts I referred to the entry made by the Registrar-General in respect of each of the leases. The effect of s 126 is that upon the making of the entry “… the estate of the lessee in such land shall thereupon determine …”. Can that statutory determination be reversed?

6. When Gillen v Laffer [1924] SASR 170 was decided by Poole J, s 94 of the RPA provided:

   94The Registrar-General, upon receipt of notice from the Commissioner of Crown Lands that any Crown lease has been lawfully forfeited or determined in whole or in part, shall make an entry to that effect in the Register of Crown Leases, and such forfeiture or determination shall thereupon have effect.

   The provision is similar to although not identical to s 126. In Gillen v Laffer the relevant entry was made by the Registrar. The case was mainly concerned with the events preceding that entry. Poole J held at 186 that s 94 referred to a “lawful forfeiture or determination” already made, which would have effect upon the making of the entry. If what preceded the entry was not lawful and effective, he considered that the entry was not effective. The decision was taken on appeal to the Full Court: Laffer v Gillen [1924] SASR 514. Counsel for the appellant argued (at 522):

   The entry by the Registrar-General was effective to determine the agreement if the cancellation was lawful at the time of registration, and after registration the cancellation cannot be impeached, even if the forfeiture were unlawful. This is the conjoined effect of the Crown Lands Act 1915, sec. 63, and the Real Property Act 1886, sec. 94.

   The Full Court reversed the decision by Poole J, but did so on the basis that there had been an effective determination of the relevant lease before the Registrar-General’s entry was made. The Full Court expressed no opinion on what Poole J said about s 94. There was then an appeal to the High Court: Gillen v Laffer (1925) 37 CLR 210. Counsel for the then respondent put a similar argument on s 94 to that put to the Full Court. The High Court restored the decision by Poole J, finding that there had not been a valid determination before the Registrar-General made the relevant entry. As to s 94 of the RPA, each member of the Court agreed with what Poole J said: Knox CJ at 221, Higgins J at 223-224, Rich J at 230 and Starke J at 232.

7. There was then an appeal to the Privy Council:  Laffer v Gillen (1927) 40 CLR 86. The appeal was allowed, and the decision of the Full Court was restored. That decision was reached on the basis that there had been a lawful determination of the lease before the entry under s 94. Their Lordships noted (at 95) that in light of that conclusion, there was no need to decide other points argued. But as the points had been argued, and as differing opinions had been expressed, they went on to state their view. In the course of doing so they compared the position under s 94 of the RPA and s 126, and apparently considered that each provision operated in the same way. The essence of their reasoning appears in a passage in which they dealt with the position of “the ordinary person” under s 126 of the RPA. They said at 96:

   In the latter case when once he has satisfied the Registrar and the necessary entry has been made in the Register, the validity of the re-entry cannot be questioned, for the statute provides that the estate of the lessee in the land shall thereupon determine, whereas in the case of a Crown lease, if the respondent is right, the validity or otherwise of the forfeiture or determination might remain an open question until it should be decided whether it was lawful or not.

   That they considered that the entry put the matter beyond recall is supported by what they said about the possibility of an entry being made on the basis of erroneous or unreliable information put before the Registrar.  They said at 97:

   It has been suggested by the appellant that any hardship to individuals deprived of land by erroneous entries on the Register is met by the provision in the Act contained for compensation either by the person responsible for an erroneous entry (sec. 203) or out of the assurance fund (sec. 208).

   However, it is worth noting that their Lordships were not considering the question of relief against forfeiture.

8. These decisions were carefully considered by Kelly J in Jennings Industries Ltd v Commonwealth of Australia (1983) 69 FLR 189. He referred to some decisions apparently not considered in the above decisions. He noted that the observations by their Lordships were not essential for their decision, and that a contrary opinion was expressed by four members of the High Court. He said at 214:

   ... I think it would be inappropriate for me, as a judge at first instance, to hold that a view of the law expressed by the Privy Council upholding an appeal from the High Court of Australia ought not to be followed. It is, I think with respect, for the High Court to decide in such circumstances that the view of the Privy Council is not to be followed.

9. The observations by the Privy Council were unnecessary for the decision, but could have provided an alternative basis for the decision reached.  Strictly, this Court is not bound to follow those observations.  Sitting as a Full Court this Court might be at liberty to prefer the decision of the High Court, the point being essential to its decision, to observations by the Privy Council.  If the Court is at liberty to do so, that is the course that I would follow.  When relief is granted against forfeiture, the lease is reinstated as if the forfeiture had not occurred.  That is well established.  If the lease is reinstated as between Hemer and Ms Collins and Ms Benni respectively, I consider that there is no obstacle to the Registrar’s entry being reversed or corrected, assuming that meantime there has been no dealing with the relevant land that gives rise to other interests that might be an obstacle to reversing or correcting the entry.

10. However, the matter was barely touched on in submissions before this Court.  If the point is to be decided, the Registrar-General should be given an opportunity to be heard.  Hemer might decide that it does not wish to pursue the point.  The grant of relief against forfeiture will restore the lease as between the parties.  The reversal or correction of the Registrar’s entry will protect Hemer against the loss of its interest through a dealing with a bona fide purchaser for value, but is not necessary to protect it as against Ms Collins and Ms Benni.  If Hemer wishes to pursue the orders directed to the Registrar-General, it should be given an opportunity to give him notice of the proceedings and to put further submissions on the point, if it so wishes.  Meantime, the Court can make orders disposing of all other issues.

    Costs of trial

11. After the Judge gave judgment in this case, Ms Collins and Ms Benni made an application for costs against Hemer on the basis of an indemnity.  Hemer had acknowledged that it was liable to pay costs on a party and party basis.  The application for costs on the basis of an indemnity was resisted, and was argued before the Judge some months after the Judge’s decision on the merits.  The Judge declined to make the orders sought by Ms Collins and Ms Benni, and ordered that costs be paid by the plaintiff on a party and party basis.

12. Hemer then applied for an order that Ms Collins and Ms Benni pay to it the costs of the application for costs on an indemnity basis.  The Judge heard submissions on that point, and declined to make that order. 

13. Hemer has applied to the Full Court for permission to appeal against that decision.  It makes the point in its written submission that the Judge rejected its application on the basis that the application by Ms Collins and Ms Benni had occupied only a small amount of time, and was not without merit.  Hemer submits that the usual rule is that costs follow the event, and the usual rule applies although the relevant hearing is a short one, and although the argument by the unsuccessful party might have some merit.  In principle, that is correct.

14. However, the Court exercises a wide discretion in relation to costs.  The order that the Judge made was that there be no order in respect of the costs of the unsuccessful application by Ms Collins and Ms Benni.  The effect of that is that the order that Hemer pay the costs of action does not embrace the costs of the application for costs on an indemnity basis.  Bearing in mind the breadth of the discretion that the Court exercises on the question of costs, I consider that permission should not be granted to enable Hemer to argue that instead of neither getting nor paying costs of the application, it should get its costs at application.  A grant of permission would give rise to nothing more than an argument about fine tuning the exercise of a discretion in relation to what would not be a large amount.  I would refuse permission to appeal.

    Conclusion

15. For these reasons I would allow the appeal and set aside the order made on 6 August 2010 dismissing the proceedings brought by Hemer.  I would refuse to make the orders sought in paras 1-6 and 11 of the Summons.  These orders would be made only if the forfeiture of the leases was ineffective.  I would make an order for relief against forfeiture of each of the leases.  It will be necessary to hear submissions on the terms of the order.  I would grant liberty to Hemer to serve notice on the Registrar-General of the applications made in paras 9-10 of the summons, and would hear further submissions from the parties and from the Registrar-General (if the Registrar-General wishes to put submissions) on the question of whether the Court can and should order the Registrar-General to reverse the entry made on the Certificate of Title of Ms Collins and Ms Benni.  I would hear the parties on the question of costs of the proceedings, if Hemer wishes to argue that it should not pay the costs of trial as between party and party.  I would hear the parties on the question of the costs of the appeal.  Hemer has succeeded only on its alternative claim for relief against forfeiture, and that must be reflected in the order for costs.

16. GRAY J:               This appeal concerns the forfeiture of a 99 year lease over land in suburban Adelaide. 

17. The lessee of the land, Hemer Pty Ltd, is the plaintiff and appellant.  At trial, Hemer sought declarations, inter alia, concerning the interpretation of a covenant of the lease relating to the payment of rates and taxes.  Hemer also sought relief against forfeiture.  The trial Judge refused to make any declarations or grant any other relief. 

    Introduction

18. In 1962 a lease was granted over an area of land adjoining Sunnyside Road, Glen Osmond.  For convenience, I shall refer to this as the leased land.  The lease was for 99 years at an annual rental, if demanded, of one shilling per year.  The lease contained two covenants: first, that the land should be used as a garden and second, that, if demanded, “rates and taxes proportional to the land … leased” were to be the responsibility of the lessee.  The lease was duly registered. 

19. It is appropriate to first say something about the layout of the leased and adjoining land.  In September 2006, Hemer purchased land adjacent to the leased land.  Hemer’s purchase gave it the benefit of the registered lease over that land.  Originally, the leased land formed a portion of one lot of land with one Certificate of Title.  In 2000, the land containing the leased portion was subdivided into two allotments.  At this time, the lease was not revised to identify whether the division meant that one or all of the registered owners of the two allotments became lessors.  The first and second respondents, Marnie Benni and Martin Ridge, were the owners of one allotment, 73A Sunnyside Road, and the third respondent, Cherise Esme Collins, was the owner of the other, 73 Sunnyside Road. 

20. At all relevant times, Ms Bennie acted on behalf of Mr Ridge, and Hemer’s affairs were conducted by its director, David Horbelt. 

21. In August 2006, when Hemer purchased the land which entitled it to the benefit of the 1962 lease, there was no water supply or sewerage connection to the leased land.  In 1962 the leased land was unimproved and comprised mainly grasses and olive trees.  The leased land forms a steep slope.  Development has occurred on the land surrounding the leased land.  However, as mentioned, the first covenant in the lease required that the leased land remain a garden.  The land has remained unimproved.

22. A dispute arose between Hemer and the respondents.  The dispute related to the obligation of the lessee under the second covenant of the lease to pay rates and taxes “proportional to the land”.  The lessors contended that this meant “proportional to the [area] of the land leased”.  The lessee contended that this phrase meant “proportional to the [value] of the land leased”.  Meetings between the parties took place, but their dispute could not be resolved. 

23. On 6 February 2008, Ms Collins sent a demand to Hemer in the following terms:

    Final Notice – Property Lease – 73 Sunnyside Road, GLEN OSMOND

    Further to our Meeting on Tuesday 05.02.2008 at 71 Sunnyside Road, I wish to advise the following:

    In accordance with the Lease Agreement, I forwarded to you an account for the Pro-Rata value of the SA Water rates based on the percentage of the site area that you occupy.  That account was forwarded to you in November 2007, and you have acknowledged receipt of that account.  The value of the account is $60.04, being your share of the quarterly rates.

    Since that time, I have paid the second quarterly instalment and your share is the same amount, being $60.04.  Total outstanding now is $120.08.  Copies of the said Invoices are enclosed.

    This letter is a Final Notice for the said sum which must be paid within 7 days.  If payment is not received, the matter will be referred to the Magistrates Court for a judgement requiring you to pay the outstanding account in full, including all associated costs.

24. On 8 February 2008, Ms Benni sent an invoice to Hemer claiming rates and taxes of $294.88, in the following terms:

    Attached is invoice for leased section of 73A Sunnyside rd that is due

    Can you please attend to payment.

25. On 27 February 2008, Ms Collins commenced proceedings in the Magistrates Court.  The particulars of claim provided:

    The plaintiff claims from the defendant the sum of $210.08 being for;

    SA Water rates percentage based on the site area on my land at 73 Sunnyside Rd, Glen Osmond leased by 61 Sunnyside Road, Glen Osmond owned by Hemer Pty Ltd (Mr David Horbelt).  Copy of lease dated 1/7/62 – 30/6/2061 (attached).  All future rates & taxes applicable to this lease must be paid by owner of 61 Sunnyside Rd, Glen Osmond (lessee).

26. Hemer filed a defence denying any indebtedness to Ms Collins.  The particulars of the defence relevantly provided:

    The Defendant:

    1.     Admits to entering into Memorandum of Lease No. 2365604 (“the Lease”) as lessee of the portion of land (“the Land”) referred to in the Lease comprised in Certificate of Title Volume 5811 Folio 177.

    2.     Admits that the Lease provides the lessor with the discretion to demand payment from the lessee for its proportion of rates and taxes in respect of the Land, but states that the lessor is estopped from asserting such a provision.

    3.     States that it does not have access to and does not use any mains water on the Land and is therefore not liable to pay for water rates.

    …

    5.     States in the further alternative that:

    5.1The lease does not provide for a method of calculating the method by which water rates should be apportioned.

    5.2Water rates should be apportioned in accordance with …:

    5.1.1The value of the Land; 

    …

    Proportional to each portion of the land comprised in Certificate of Title Volume 5811 Folio 177.

    6.     Denies that it is indebted to the Plaintiff for the amount claimed by the Plaintiff or for any amount at all.

27. On 16 June 2008, a directions hearing was held in the Adelaide Magistrates Court, following which, discussion took place between Mr Horbelt and Ms Collins.  At this time Mr Horbelt inquired whether Ms Collins was interested in selling the whole or part of her part of the leased land. 

28. On 14 July 2008, Ms Collins made further demands of Hemer for the amounts previously claimed together with claims for further rates and taxes.  The letter was as follows:

    Final Notice – Property Lease – 73 Sunnyside Road, GLEN OSMOND

    Further to my letter dated 06.02.2008 by registered post, I wish to advise the following:-

    In accordance with the Lease Agreement, I forwarded to you an account for the Pro-Rata value of the SA Water rates based on the percentage of the site area that you occupy.  That account was forwarded to you in November 2007, and you have acknowledged receipt of that account.  The value of the account is $60.04, being your share of the quarterly rates.

    Since that time, I have paid the second quarterly instalment and your share is the same amount, being $60.04.  I have now received the final quarterly instalment, with your share being $60.04.  Total now outstanding to the end of the financial year 30.06.2008 is $180.12 (copies enclosed).

    This is a Final Letter of Demand for the said sum, which must be paid within 14 days.

    On the same date, Ms Benni, made further demand by letter as follows:

    LETTER OF DEMAND

    For outstanding monies

    The amount of $294.88 on invoice 00000060 on 6.2.08 Is currently still outstanding.  Payment is due in full within 14 Days.

    Attached is copy of invoice and details previously sent by registered post

29. On 29 July 2008, without notice to Hemer or Mr Horbelt, Ms Collins entered the leased land, and asserted that this amounted to a re-entry.  On 30 July 2008, without notice, Ms Benni and Mr Ridge entered the leased land and they too asserted that this amounted to a re-entry. 

1. The question that arises on the present appeal is whether it may be concluded that Ms Benni and Ms Collins, in all the circumstances, were adopting the lease and seeking to act under the lease, rather than seeking to forfeit the lease.  For reasons to be discussed later, it is evident that they were acting in unison is seeking to obtain relief in respect of the one lease that extended over both of their properties. 

2. The Judge rejected the submission of Hemer that there had been an election by Ms Collins to treat the lease as ongoing both through her continuing demands for payment and through the terms of the proceedings that had been issued.  It was said that the conduct of Ms Benni was to a like effect and that her continuing demands for payment amounted to an election to treat the lease as ongoing.  The Judge found this submission to be without substance:[11]

   In the present case I do not consider that the first and second defendants were ever faced with an election between inconsistent rights; certainly not at the stage when the second demand, together with the notice to remedy breach, was sent. I cannot see that there was any inconsistency. Much the same applies with respect to the conduct of Ms Collins. After sending a demand and a “final notice”, together with a fresh demand, she took proceedings in the Adelaide Magistrates Court to recover the amounts owed. I do not consider that this amounted to an election by her. The two courses were not inconsistent. She did not pursue the claim to judgment. But even had she done so, I see no reason why that course would have been inconsistent with her taking steps to determine the lease.

   There can be no question of election until each of the two inconsistent alternatives has unconditionally accrued: McDrury v Luporini [2000] 1 NZLR 652 at 664. Even then, there is no election in the absence of an unequivocal indication that the lease will not be forfeited notwithstanding the right to do so: McDrury v Luporini at 664–5. The force of this authority was accepted by Barrett J in Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2010] NSWSC 29 at [374]–[378]. The right to re-enter under s 10 of the LTA did not accrue until expiry of the fourteen day period specified in the letters of each of Ms Benni and Ms Collins, being 28 July 2008. Re-entry was effected by Ms Collins on 29 July 2008 and by Ms Benni on 30 July 2008. It is not suggested that there was conduct in between times that could have amounted to an unequivocal election. In fact, there was no conduct at all.

   …

   It is true that the defendants did not advise the plaintiff of the fact of their respective re-entries and did not — apart from Ms Benni’s removal of at least some of the fence dividing the leased land from the rest of her land — do anything physically by way of giving notice of their repossession of the land. However, I do not consider that this is of any moment, bearing in mind that the land was unimproved bush land which was rarely entered by anyone. Moreover, all defendants moved swiftly to make their applications to the Registrar-General. Pursuant to s 126 of the RPA the notation in the register book by the Registrar-General of each lessor’s re-entry had the effect of determining the plaintiff’s estate in each allotment.

   [11]   Hemer Pty Ltd v Benni & Ors [2010] SASC 242, [46]-[47], [50].

3. With respect I disagree with the conclusion of the Judge.  To my mind it is plain that the respondents were presenting claims with respect to accrued rates and taxes and to ongoing rates and taxes on the basis of an interpretation of the second covenant that they were to be apportioned in accordance with area not value.  Ms Collins was asserting in her Magistrates Court claim that she was seeking relief in regard to the apportionment of both past and future rates and taxes.  It is evident that the respondents, although making separate demands, were acting in unison.  The position of Hemer was well known to the respondents and was evidenced both through the defence filed to Ms Collins’ proceedings in the Magistrates Court, and through correspondences. 

4. I consider it to be striking that, in these circumstances, without any notice at all, the respondents would proceed to forfeiture.  In my view, this was inconsistent conduct on the part of the respondents – it was not open to them on the one hand to pursue a disputed claim for the payment of apportioned rates and taxes both past and future, and whilst pursuing those claims under the lease, purport to forfeit the lease.

   Re-entry

5. It is relevant to immediately record that certain powers are to be implied in the lease as a consequence of the terms of section 125 of the Real Property Act 1886 (SA). That section provides:

   In every lease there shall also be implied the following powers in the lessor, that is to say:

   (a)     power to distrain according to law;

   (b)     that he may, by himself or his agents, at all reasonable times, enter upon the demised property, and view the state of repair thereof, and may serve upon the lessee, or leave at his last or usual place of abode in the State, or upon the demised property, a notice in writing of any defect, requiring him within a reasonable time, to be therein prescribed, to repair the same;

   (c)     that in case the rent, or any part thereof, shall be in arrear for the space of three months, although no demand shall have been made thereof, or in case default shall be made in the fulfilment of any covenant, whether expressed or implied in such lease, on the part of the lessee, and shall be continued for the space of three months, or in case the repairs required by such notice as aforesaid shall not have been completed within the time therein specified, it shall be lawful for the lessor to re-enter upon and take possession of the leased premises.

6. Section 126 of the Real Property Act addresses the Registrar’s authority to note particulars of re-entry by a lessor:

   The Registrar-General, upon proof to his satisfaction of re-entry by the lessor, in manner prescribed by the lease, or under the power in the third subsection of the last preceding section provided for, or of recovery of possession by a lessor, by any proceeding in law, shall note the same by entry in the Register Book, and the estate of the lessee in such land shall thereupon determine, but without releasing him from his liability in respect of the breach of any covenant in such lease expressed or implied.

7. Section 10 of the Landlord and Tenant Act 1936 (SA) provides that a right of re-entry or forfeiture is not enforceable unless and until a lessee is given notice to remedy a breach:

   A right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant or condition in the lease shall not be enforceable by action or otherwise, unless and until—

   (a)the lessor serves on the lessee a notice specifying the particular breach complained of, and, if the breach is capable of remedy, requiring the lessee to remedy the breach, and in any case requiring the lessee to make compensation in money for the breach; and

   (b)the lessee fails within a reasonable time thereafter to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money to the satisfaction of the lessor for the breach.

8. Section 11 of the Landlord and Tenant Act addresses the power of the Court to grant relief against forfeiture:

   (1)Where a lessor is proceeding by action or otherwise to enforce such a right of re-entry or forfeiture the lessee may, in the lessor's action (if any), or in any action brought by himself, apply to the Supreme Court or a judge thereof for relief, and the court or judge may grant or refuse relief as such court or judge, having regard to the proceedings and conduct of the parties under the last preceding section and to all other circumstances, may think fit.

   (2)If the court or judge grants relief it or he may grant it on such terms (if any) as to costs, expenses, damages, compensation, penalty, or otherwise, including the granting of an injunction to restrain any like breach in the future, as the court or judge in the circumstances of each case thinks fit.

9. Sections 10 and 11 of the Landlord and Tenant Act 1936 (SA) have not been amended since they were enacted. Their precursors are sections 1 and 2 respectively of the Landlord and Tenant Act 1893 (SA), which were in turn derived from the Conveyancing and Law of Property Act 1881 (UK).   Section 14(1) and section 14(2) of that English Act are in the same terms as the relevant sections of the 1893 South Australian Act.  Section 14(1) and section 14(2) of the English Act have since been repealed, but now appear in identical terms in section 146(1) and section 146(2) of the Law of Property Act 1925 (UK).

10. It is clear from the terms of section 10 of the Landlord and Tenant Act and the settled authority on the point, that section 10 demands that for a right of re-entry or forfeiture to arise, a lessor must serve on a lessee a notice specifying the particular breach complained of and requiring that breach to be remedied if so capable and further requiring compensation in money for the breach. If these requirements are not complied with, re-entry or forfeiture is invalid. The question that arises in the present proceeding however, is whether, when acting under section 10 of the Landlord and Tenant Act, a lessor must give notice to the lessee of an intention to re-enter or forfeit if the breach is not remedied.

11. To my mind notice of an intention to re-enter should be given.  The giving of such notice would obviate the risk and the very real risk of an injustice occurring.  In the present proceeding, Hemer had a long term lease subject to a peppercorn rental.  The rates and taxes claimed were in a relatively nominal amount.  It might be thought that if Hemer had understood that the respondents were about to forfeit the lease, that payment would have been made at the very least into Court, or alternatively, full payment tendered immediately under protest.  It is plain that Hemer wished to retain its interest under the lease.  Modest amounts of money were involved in the dispute and appear to be well within the financial capacity of Hemer. 

12. It is established that a clause in a lease allowing re-entry is to be strictly construed against the lessor.[12] The same is true of an implied covenant. To construe section 10 of the Landlord and Tenant Act as requiring notice of an intention to re-enter would be to imply a term arising from that provision. I see no difficulty in implying into section 10 a term that the notice requiring the lessee to remedy the breach should also specify, if it be the case, that the lessor proposes to re-enter the premises if the breach is not remedied.[13]

    [12]   See Abdy (Sir W) v Stevens (1832) 110 ER 112, 303; see also Ferella v Otvosi [2005] NSWSC 962; further see the seminal text, Hill and Redman’s Law of Landlord and Tenant (16^th ed, 1976) where it is said of the construction of forfeiture clauses at 462:

    “The ordinary rules of construction apply to conditions and covenants the breach of which may lead to a forfeiture, and the intention of the parties has to be found from the language they have used.  Conditions of this nature are entitled neither to favour nor disfavour, but a fair construction must be put upon them according to the apparent intent of the contracting parties.

    Thus, in the case of a covenant with a proviso for re-entry, the Court has to ascertain the meaning of the covenant without regard to the forfeiture, and then see, upon that ascertained meaning, whether a forfeiture has been incurred.  But, subject to this principle, the Court leans towards a literal or strict construction of a clause of forfeiture; and, since the clause destroys or defeats the estate, it is subject to the subsidiary rule of construction that it is to be taken most strongly against the person at whose instance it is introduced, that is, the lessor.  Hence, before the forfeiture is established, it must be clearly shown, in the case of a condition, that the event specified in the condition has happened, and, in the case of a proviso for re-entry on breach of covenant, that the proviso extends to the covenant, and that there has been a breach thereof.” (Footnotes omitted. Emphasis added.)

    [13]   In Laffer v Gillan (1924) SASR 514 at 536 Angas-Parsons and Napier JJ in dicta noted that under similar legislation to section 10, that the question of the extent of notice was not free from doubt.

13. This construction is fortified by the terms of section 11 of the Landlord and Tenant Act. That section contemplates that both before and after re-entry by a lessor, a lessee may apply for relief against forfeiture. Accordingly, it is my view that it was contemplated that a lessee could apply for relief upon receipt of a notice pursuant to section 10 of the Act. A lessee is placed in a difficult position in this respect if not warned of an intention to re-enter.

14. True it is that the Landlord and Tenant Act does not, unlike some other Australian jurisdictions, schedule a statutory form of notice.  Those other jurisdictions have statutory forms of notice that do contain a requirement to express an intention to re-enter, notwithstanding that requirement not appearing explicitly in the relevant statutory provision.[14] However, for the reasons given above, the existence of these statutory forms in other jurisdictions is extraneous to whether or not section 10 impliedly requires such notice.

    [14] For example see section 124 of the Property Law Act 1974 (Qld), form 7; section 129 of the Conveyancing Act 1919 (NSW), schedule 6.

15. Further, the view that I have adopted is supported by the discussions in English authorities about the provisions equivalent to section 10 of the Landlord and Tenant Act in the context of the requirement that the landlord specify the particular breach.  In Fletcher v Nokes, North J observed the following about the object of the notice, which has become an often quoted passage:[15]

    …The notice ought to be so distinct as to direct the attention of the tenant to the particular things of which the landlord complains, so that the tenant may have an opportunity of remedying them before an action to enforce a forfeiture of the lease is brought against him. …

    [15]   Fletcher v Nokes [1897] 1 Ch 271, 274; this passage has for example received positive attention in Fox v Jolly [1916] AC 1, 13 (Lord Buckmaster LC); Jolly v Brown [1914] 2 KB 109, 122; In re Serle [1898] 1 Ch 652, 656-657.

16. In Horsey Estate Ltd v Steiger, Lord Russell CJ, in delivering the judgment of the Court, made the following pertinent observations with respect to the notice required:[16]

    …To determine the character of the required notice, what it shall contain and when it ought to be given, it is necessary to consider the scope of s. 14 of the Act of 1881 as a whole.  The object seems to be to require in the defined cases (1.) that a notice shall precede any proceeding to enforce a forfeiture, (2.) that the notice shall be such as to give the tenant precise information of what is alleged against him and what is demanded from him, and (3.) that a reasonable time shall after notice be allowed the tenant to act before an action is brought.  The reason is clear: he ought to have the opportunity of considering whether he can admit the breach alleged; whether it is capable of remedy; whether he ought to offer any, and, if so, what, compensation; and, finally, if the case is one for relief, whether he ought or ought not promptly to apply for such relief.  In short, the notice is intended to give to the person whose interest it is sought to forfeit the opportunity of considering his position before an action is brought against him.

    [Emphasis added.]

    [16]   Horsey Estate Ltd v Steiger [1899] 2 QB 79. See also ex Parte Taylor [1980] Qd R 253, 256. Garrow’s Law of Real Property (5^th ed), 710. 

17. Accordingly, I do not consider that the notices provided by Ms Benni and Ms Collins met the requirements.  In my view, the purported re-entries by the respondents were not valid re-entries.

18. A further matter arises which I propose to briefly address. If the demands and purported re-entries by Ms Collins and Ms Benni were in relation to non-payment of rent, section 12(5) of the Landlord and Tenant Act would apply to negate the need for notice for the purposes of section 10 of the Act to be given. In my view however, the demands and purported re-entries in this proceeding were not in relation to the non-payment of rent, and accordingly, section 12(5) does not apply.

    Correction of the Register Book

19. A question that arises for consideration relates to the Court’s powers to direct the Registrar-General to amend or correct the Register Book. As Doyle CJ has pointed out, when dealing with relief against forfeiture, there is conflicting authority as to the power of the Court, having regard to the terms of section 126 of the Real Property Act.  The Chief Justice has traced the history of the proceeding in Gillen v Laffer in this Court,[17] the High Court[18] and the Privy Council.[19]  Reference is also made to the decision of Kelly J in Jennings Industries Ltd v Commonwealth of Australia,[20] and to the conflict between dicta in the Privy Council on this topic, and the contrary opinion expressed by four members of the High Court of Australia.   

    [17]   Gillen v Laffer [1924] SASR 170; Laffer v Gillen [1924] SASR 514.

    [18]   Gillen v Laffer (1925) 37 CLR 210.

    [19]   Gillen v Laffer (1927) 40 CLR 86.

    [20]   Jennings Industries Ltd v Commonwealth of Australia (1984) 69 FLR 189.

20. I have formed the tentative view that the views of the High Court should prevail.  Kelly J in Jennings Industries Ltd made reference to the earlier New South Wales decision of Simpson CJ in Equity in Brooker’s Colours Ltd v Sproules,[21]  and in particular to part of the following observations:

    …Here, there was default made in the payment of rent, and the lessor re-entered.  Under the Common Law system, the lessee’s interest would come to an end on the date of the re-entry; but s. 55 is, to some extent, in favour of the lessee, as under that section his interest does not determine until a note of the re-entry is made in the register book.  When the lessee’s interest determines, is he deprived by s. 55 of his equity to come to this Court, and ask to have his estate revived on payment of all arrears? I can see nothing in the Act which takes away that right.  Sec. 55 says that his estate comes to an end; but that is a very different thing from saying that his equity to have that estate revived has come to an end.  In Baker’s Creek Consolidated Gold Mining Co v. Hack (15 N.S.W. Eq. 207), Mr. Justice Owen says at p. 221: “The Real Property Act, as I understand it, was not intended to interfere with contracts and equities between parties themselves. The object of the Act was solely to render dealings with properties under the Act simpler than under the old real property law, and to enable third parties to deal with the persons who appeared as proprietors, under the documents and entries of the Real Property Office, as if they were really the proprietors, subject only to those interests and equities, which appear on the records and the instruments of title.” The law is stated in similar terms in Gibbs v. Messer ([1891] A.C. 248 at p. 254). Sempill v. Jarvis (6 S.L.R. Eq. 68), as far back as 1867, decided that a registered proprietor could not, by registration alone under the Act, get rid of equities binding him.  He, by becoming a registered proprietor under the Act, is in no better position as regards equities against himself that he was before he became a registered proprietor.  That decision has stood for 43 years, and has been followed by numerous other cases.  That is very analogous to the present case.  Here, under s. 55, the lessor caused a notice to be put in the register book, notifying to the public that the lessee’s estate had come to an end.  But there is nothing in the Act to show that the lessee’s equity to have his estate revived has come to an end. I therefore overrule the demurrer with costs. 

    However, my view, I repeat, is only tentative, and I would hear the parties further.  I would allow the Registrar-General to make submissions on this question. 

    [21]   Brooker’s Colours Ltd v Sproules (1910) 5 NSWSR 839, 841-842. 

1. There is another possible alternative.  In Platt v Ong[22] Gillard J traced the history of the Court of Equity relieving against forfeiture, and in that respect observed:[23]

   It must be remembered that originally at common law on breach of covenant by a lessee a lessor was entitled to re-enter or determine the lease, and the service of the writ by the lessor on the lessee was regarded as bringing the demise to an end: see Canas Property Co v K L Television Services Ltd, [1970] 2 All ER 795, at p. 798. Even though the lease was determined at law, a Court of Equity could intervene at the suit of the lessee and restrain the action for forfeiture, if it was still proceeding, and if the breaches relied on by the lessor concerned the non-payment of rent only, a Court of Equity could relieve against the forfeiture, and usually did so, on specified conditions. If the lease were at an end, a Court of Equity could not bring the lease back into existence, but directed the parties to execute a new lease on the same terms; see Bowser v Colby (1841) 1 Hare 109 at p. 130; [1841] EngR 1193; 66 ER 969, at p. 977; [1835-42] All ER Rep 478.

   Statutory provisions were enacted in the United Kingdom to alter this procedure and these statutory provisions were copied in this State. If a lessee were entitled to relief, it was granted by the court and under the statutory provisions it became unnecessary for the parties to execute a new lease (see infra). At the same time, it should be remembered, however, that the Court of Equity did always refuse relief if the conduct of the applicant was such as to make it inequitable that relief should be given to him: see Bowser v Colby, supra, at (Hare) p. 134; (E.R.) p. 979: Gill v Lewis, [1956] EWCA Civ 2; [1956] 2 QB 1, at p. 17; [1956] EWCA Civ 2; [1956] 1 All ER 844; Belgravia Insurance Co v Meah, [1963] 3 All ER 828, at p. 832; Public Trustee v Westbrook, [1965] 3 All ER 398.

   [22]  Platt v Ong [1972] VR 197.

   [23]   Platt v Ong [1972] VR 197, 199.

   Relief against Forfeiture

2. It is evident in my reasons above that, in my view, there was no valid re-entry, in which case, there was no forfeiture.  Accordingly, it is not strictly necessary to consider whether or not the Judge erred in refusing to grant relief against forfeiture.  However, in my view, this was a strong case for relief against forfeiture.  The term of the lease has some 40 years to run and the rates and taxes payable appear to be modest.  At all times, Hemer has displayed a desire to retain its interest in the land. 

3. The Judge’s refusal to grant relief appears to have been influenced by two factors.  First, that the interpretation proffered by Hemer was not bona fides and lacked a sensible basis to effect an apportionment, and secondly, that Hemer could not be relied on in the future to make payments.  The second factor could be addressed by requiring an undertaking or by some appropriate security.  To my mind the Judge’s exercise of discretion was inappropriately influenced by these factors.  As this is a discretionary matter it would, if necessary, be appropriate in the circumstances for this Court to re-exercise the discretion.  In this respect, I agree with the reasons of Doyle CJ and were it necessary, would concur in the making of an order granting relief against forfeiture.

   Another Matter

4. Hemer has sought permission to appeal from an indemnity costs order made by the trial Judge.  Having regard to my reasons, the orders of the trial Judge should be set aside, including the orders as to costs.  In these circumstances, there is no need to consider Hemer’s application. 

   Conclusion

5. I would allow the appeal.  I would set aside the orders made by the trial Judge.  I would hear the parties further as to the declarations and orders to be made, consistent with these reasons.  I would also hear the parties as to costs, both of the trial and the appeal.

1. SULAN J: The background facts and the issues for determination by this Court are contained in the judgments of Doyle CJ and Gray J.  I do not repeat them.  I would allow the appeal.  I would grant liberty to Hemer to serve notice on the Registrar General of the applications made in paragraphs 9 and 10 of the Summons.  Subject to hearing submissions, if any, from the Registrar General, I would order the Registrar General to register upon Certificate of Title 5811 Folio 178 a lease naming Marie Benni and Martin Ridge as lessors and Hemer Pty Ltd as lessee in the form of the lease and in terms contained in lease 2365604, previously registered upon the said land.  I would make an order in the same terms in respect of Certificate of Title Volume 5811 Folio 177, save that the lessor be named as Cherise Esme Collins.

2. I agree with the reasons of the Chief Justice in respect of the question of relief against forfeiture. However, in light of my further reasons, it is unnecessary to grant such relief.  In respect of other questions raised during the appeal, I make the following observations.

3. The first question that arises is whether the second covenant of the lease which requires the lessee, if the lessor so demands, to pay the rates and taxes proportional to the land should be interpreted as relating to apportionment based on area or on value.  I consider the terms of the lease are ambiguous in this respect. 

4. In Royal Botanic Gardens And Domain Trust v South Sydney City Council,[24] Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ approved the approach of the Court of Appeal which considered the surrounding circumstances to assist in the interpretation of a written contract if the language is ambiguous or susceptible to more than one meaning.  That is the position in respect of the lease in question.

   [24]   Royal Botanic Gardens And Domain Trust v South Sydney City Council [2009] 240 CLR 45.

5. The lease was entered into in 1962 for a period of 99 years.  The land the subject of the lease must be maintained as a garden.  It is on a steep slope and requires little or no maintenance.   The amount of the rent is nominal.  In every respect, it cannot be the case that this was a commercial transaction.  In my view, the lessor did not intend the lessee to be financially burdened.   

6. If the apportionment of rates and taxes were to be based on area, the lessee who is committed for 99 years could potentially bear a significant financial burden as a consequence of development on surrounding allotments.  In my view, the lessor could not have intended the lessee to be required to bear such a disproportionate burden of the rates and taxes when the value of the leased land is unlikely to increase in comparison to the surrounding land which has been, or can be, developed. 

7. I agree with the conclusion of Gray J, whose draft reasons I have had an opportunity of considering, that the claims made by Ms Benni and Ms Collins for apportionment of the rates and taxes were calculated on an incorrect basis.  I agree that a declaration should be made that the words “proportionate to the land herein leased” in the Memorandum of Lease means the value of the leased land as a proportion of the value of the whole. 

8. A further question that arises for determination is whether a lessor is required to give notice to a lessee of the lessor’s intention to re-enter if a default is not remedied. 

9. The lessor’s power to re-enter is an implied term of the lease in the case of a failure by the lessee to comply with a covenant, in this case to pay the rates and taxes upon demand, and that failure being not remedied within three months.[25]

   [25]   See Real Property Act 1886 (SA) s 125.

10. Section 10 of the Landlord and Tenant Act 1936 (SA) provides:

    No re-entry till notice to tenant to remedy breach

    A right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant or condition in the lease shall not be enforceable by action or otherwise, unless and until –

    (a)the lessor serves on the lessee a notice specifying the particular breach complained of, and, if the breach is capable of remedy, requiring the lessee to remedy the breach, and in any case requiring the lessee to make compensation in money for the breach;  and

    (b)the lessee fails within a reasonable time thereafter to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money to the satisfaction of the lessor for the breach.

11. The section does not expressly require a lessor to give notice that the lessor intends to re-enter if the lessee fails to remedy the breach.  Can it be implied that, before a lessor exercises its right to re-enter, notice of the lessor’s intention must be given to the lessee? 

12. Part I of the Landlord and Tenant Act is concerned with forfeiture and relief.  Section 4 provides that a landlord may bring an action for recovery of demised premises without making a formal demand for rent or re‑entry if the rent is in arrears for half a year or more and the landlord has, by law, the right to re-enter for non-payment of rent.  The Act provides that if the tenant pays the arrears and other expenses and costs, all further proceedings shall cease and be discontinued.

13. The effect of the provision is that once a tenant is served with proceedings seeking possession, the tenant can remedy the position by making the required payment of amounts outstanding into court or to the landlord. 

14. Section 10, which deals with the enforceability of the right of re-entry and forfeiture for a breach of a covenant in a lease, requires notice to be given to the tenant of the nature of the breach, and a requirement that the lessee remedy the breach. In my view, it is implicit that the lessee be informed of the intention of the lessor to re-enter and take possession if there is a failure to remedy the specified breach or breaches.

15. Section 11 of the Act provides:

    Court or judge may grant relief

    (1)     Where a lessor is proceeding by action or otherwise to enforce such a right of re-entry or forfeiture the lessee may, in the lessor’s action (if any), or in any action brought by himself, apply to the Supreme Court of a judge thereof for relief, and the court or judge may grant or refuse relief as such court or judge, having regard to the proceedings and conduct of the parties under the last preceding section and to all other circumstances, may think fit.

    (2)     If the court or judge grants relief it or he may grant it on such terms (if any) as to costs, expenses, damages, compensation, penalty, or otherwise, including the granting of an injunction to restrain any like breach in the future, as the court or judge in the circumstances of each case thinks fit.

    The section contemplates that a lessee may bring an application for relief against forfeiture, both before and after re-entry has been effected. In my view, it was contemplated that a lessee could seek relief upon being given notice under section 10. If the notice under section 10 does not stipulate the lessor’s intention to re-enter, then a lessee who is served with a notice may well be misled about the intention of the lessor to re-enter. In my view, it does not follow that, because in other jurisdictions the statutory form to be served on a lessee requires notice to be given, and the fact that there is no such statutory form in South Australia that, therefore, there is no requirement to give notice of an intention to re-enter. It would be contrary to the scheme of the legislation to permit re-entry without reasonable notice from the lessor to the lessee of the lessor’s intention.

16. The appeal should be allowed.  I would set aside the order made by the trial Judge dismissing the proceedings.  I would hear the parties as to the declarations and consequential orders to be made.

17. I would hear the parties on the question of costs.  In other respects, I agree with the reasons of the Chief Justice.