Hemer Pty Ltd v Benni - [2010] SASC 242

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
HEMER PTY LTD v BENNI & ORS
[2010] SASC 242
Judgment of The Honourable Justice Vanstone
6 August 2010
LANDLORD AND TENANT - COVENANTS - ACTIONS FOR BREACH OF COVENANT - GENERALLY
LANDLORD AND TENANT - TERMINATION OF THE TENANCY - FORFEITURE - NOTICE AND DEMAND BEFORE RE-ENTRY
LANDLORD AND TENANT - TERMINATION OF THE TENANCY - FORFEITURE - RELIEF AGAINST FORFEITURE
Dispute arising over a covenant in a lease agreement requiring payment by the plaintiff of rates and taxes proportional to the land leased - the plaintiff sought relief against forfeiture of the lease - the plaintiff acknowledged it was in breach of the lease agreement but contended that by failing to enforce the lease and give sufficient notice of the breach the defendants had elected to maintain the lease and consequently waived the breach - whether the institution of proceedings in the Magistrates Court or further demands to comply with the covenant constituted an election to maintain the lease - whether the defendants' notification of the breach sufficiently complied with the legislation - whether the defendants' re-entry was effective.
Held: there was no occasion to elect as between inconsistent rights and no question of waiver of rights arising from the breaches - no ground upon which to grant relief against forfeiture - summons dismissed.
Real Property Act 1886 (SA), s 125, s 126; Landlord and Tenant Act 1936 (SA), s 10, s 11, referred to.
Consolidated Development Pty Ltd v Holt (1986) 6 NSWLR 607; Howells v Permanent Trustee Company of NSW Ltd (1956) 73 WN (NSW) 347; Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; Fox v Jolly [1916] 1 AC 1; Ex parte Dally-Watkins; Re Wilson (1955) 72 WN (NSW) 454; McDrury v Luporini [2000] 1 NZLR 652; Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2010] NSWSC 29; Rose v Spicer [1911] 2 KB 234; Shiloh Spinners Ltd v Harding [1973] AC 691; Sparta Nominees Pty Ltd v Orchard Holdings Pty Ltd [2002] WASC 54; Legione v Hateley (1983) 152 CLR 406; Leads Plus Pty Ltd v Kowho Intercontinental Pty Ltd (2000) 10 BPR 18,085, discussed.

HEMER PTY LTD v BENNI & ORS
[2010] SASC 242
Civil
VANSTONE J:
Introduction

The plaintiff seeks relief against forfeiture of a lease over a small parcel of suburban land, which takes in part of the land of the first and second defendants and part of the adjoining land of the third defendant, as well as various related declarations, including as to the interpretation of a covenant in the lease requiring payment by the plaintiff of some part of the rates and taxes levied on each title.
Background
Except where otherwise indicated, the following facts are common ground and I make findings in terms of them. On 11 September 2006 the plaintiff company settled the purchase of a house property at Glen Osmond. The land it acquired adjoined that of several other persons. They included the first and second defendants, who were the registered proprietors of a vacant block; the third defendant who also owned an adjoining vacant block; and a Mr Tucker who lived in a house on land adjoining the allotments of both the plaintiff and the third defendant Ms Collins. The second defendant, Mr Ridge, did not give evidence in this trial. At all relevant times his co-owner, Ms Benni, the first defendant, has spoken for both of them. I shall refer to that land as “Ms Benni’s land”. Mr Blight represented all three defendants at trial.
The plaintiff’s purchase also gave it the benefit of a registered lease, number 2365604, over part of the land of Ms Benni and Ms Collins. (Their land had been divided into two allotments since the lease was granted. There was a separate lease over part of Mr Tucker’s land, which I assume was in similar terms.) The lease was originally between a Mr Turner as lessor and a Mr Chapman as lessee. The parties are respectively the successors in title to the original lessor and lessee, at least in part. The lease was for a term of 99 years, commencing on 1 July 1962. The rental, payable on demand, was one shilling per annum. The lease is a concise document. It does not appear to have been drawn with any expertise. The dispute in this matter centres on the second of two covenants within it. I set out the terms of the lease:
MEMORANDUM OF LEASE
I, IAN STANMORE TURNER of 22 Godfrey Terrace, Leabrook, Architectural Draughtsman, being registered as the proprietor of an estate in fee simple subject however to such encumbrances liens and interests as are notified by Memorandum underwritten or endorsed hereon in the whole (Memorandum of Transfer dated 30/6/62 from ROBERT CHARLES CHAPMAN to myself being portion of) of the land comprised in / Certificate of Title Volume 2745 Folio 182 being Lot No. 71
SUBJECT nevertheless to rights of way and easements to the Minister of Works as thereon mentioned
DO HEREBY LEASE to ROBERT CHARLES CHAPMAN OF 61 Sunnyside Road, Glen Osmond, Company Director, that portion of the said land above described marked “D” in the plan attached hereto and coloured red SUBJECT nevertheless to a Right-of-Way and easement to the Minister of Works over portion of the land shown in the said plan attached and marked ‘Easement’ to be held by the said Robert Charles Chapman for a term of ninety nine years commencing from 1/7/62 expiring on the 30^th day of June in the year Two thousand and sixty one at an annual rental of ONE SHILLING (1/-) payable on demand SUBJECT to the following covenants:-
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.
I, the abovenamed ROBERT CHARLES CHAPMAN do hereby accept this lease of the above described land to be held by me as lessee and subject to the conditions restrictions and covenants above set forth.
(signing clauses)
It is the obligation imposed in the second covenant which has led to these proceedings.
The plaintiff company is Hemer Pty Ltd. The director who had carriage of this action is Mr David Horbelt. On 19 November 2007 Ms Collins sent a letter to the plaintiff, correctly addressed to the Glen Osmond house property. Mr Horbelt denies having received that letter at that time, but I accept Ms Collins’ evidence that he later verbally acknowledged having received the letter and having disposed of it. In the letter she introduced herself and referred to the lease agreement, a copy of which she enclosed. She referred to the obligation falling upon the plaintiff to pay a proportion of the rates on her property. Ms Collins enclosed a copy of an account from SA Water and asserted that the obligation falling upon the plaintiff was to pay 40.2 per cent of both water rates and council rates. That amounted to $60.04. She inquired as to the plaintiff’s preferred manner of payment. She provided a telephone number.
On 16 January 2008 Ms Collins sent a copy of that letter to Mr Horbelt by facsimile transmission. A conversation followed. I accept Ms Collins’ evidence that Mr Horbelt told her that he would not be paying anything.
On 5 February 2008 a meeting took place involving Ms Benni, Ms Collins, Mr Tucker and Mr Horbelt. It took place at Mr Tucker’s home. There was discussion at that meeting about the terms of the second covenant, Mr Horbelt asserting that he was not prepared to pay rates based on an improved capital value. At that stage, of course, the only land which was improved was that of Mr Tucker. Indeed, although the defendants had plans to build on their allotments, their land remained unimproved at all relevant times.
On 6 February 2008 Ms Collins sent to the plaintiff company, at an address in Norwood, a letter headed “Final Notice”. Ms Collins referred to the failure to pay the previously requested amount of $60.04 and advised that a further water bill had since been paid by her. She asserted that the total amount outstanding was now $120.08. She enclosed copies of the invoices. She then advised:
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 judgment requiring you to pay the outstanding account in full, including all associated costs.
On 8 February 2008 Ms Benni sent to the plaintiff an invoice requiring reimbursement to her of a portion of her council rates, emergency services levy, SA Water bill and land tax. She requested payment of $294.88.
On 27 February 2008 Ms Collins commenced proceedings in the Adelaide Magistrates Court against the plaintiff, claiming $210.08. On 18 March 2008 the plaintiff filed a defence to the action. The plaintiff denied that it was indebted to Ms Collins in any amount. It is instructive to set out the particulars of the defence in full.
PARTICULARS OF DEFENCE
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.
4.     States in the alternative that:
5.1 (sic)     Upon the lessee’s (sic) entering into the Lease the lessor undertook not to enforce its discretion to demand payment for rates and taxes.
5.2 (sic)     Throughout the term of the Lease, all previous lessors did not at any time enforce the payment of rates and taxes.
5.3 (sic)     The Defendant entered into the Lease in reliance on the (then) lessor’s undertaking not to demand rates and taxes and that the defendant would suffer detriment should the Plaintiff now resile from that undertaking, and the Plaintiff is therefore estopped from doing so.
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 either:
5.1.1The value of the Land; or
5.1.2The actual water usage of the lessee,
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.
SIGNED          (illegible)  DATE: 17/03/08
I find that after a directions hearing on 16 June 2008 at the Adelaide Magistrates Court, Mr Horbelt and Ms Collins had a discussion in which Mr Horbelt told Ms Collins that no amount would be paid to her in respect of rates and taxes. He also asked whether she was interested in selling the whole or part of the leased land to him and expressed the view that it was not worth very much.
On 14 July 2008 Ms Benni sent a letter to the plaintiff, headed “Letter of Demand”. She advised that the amount of $294.88 previously invoiced remained outstanding. She also issued an invoice in the amount of $289.68 against further rates and taxes. She enclosed the relevant accounts.
On the same day Ms Collins demanded payment of $180.12, being the two amounts previously claimed and a further, similar amount, based on an SA Water bill. Copies of the bills were enclosed.
After 14 July 2008 neither Ms Benni nor Ms Collins issued any invoice or demand for payment for newly accrued amounts, or indeed for any amount at all.
I find that on 29 July 2008 Ms Collins re-entered the leased land with a witness. Since that time she has gone onto her land for various reasons. On 30 July Ms Benni and her co-owner re-entered the land and took possession of it. Although there was an old wooden fence along part of the boundary, that did not impede Ms Benni and Mr Ridge in entering. In August 2008 Ms Benni knocked down some of the remnants of that fence. Ms Benni went onto the land for various purposes subsequently. The defendants did not advise the plaintiff that they had purported to take possession of the leased land. On 7 and 8 August respectively Ms Collins and Ms Benni applied to the Registrar-General to note their re-entries. Those applications took the form of statutory declarations and were in similar terms. Among other things, each asserted that the lessee was in breach of the second covenant of the lease and had been in arrears in payment of rates and taxes for more than five months and that notice to remedy the breach had been delivered by registered post. I set out several of the relevant paragraphs of Ms Collins’ declaration, which, apart from the dollar amounts, are identical to those of Ms Benni.
…
(4)     Pursuant to the said Memorandum of Lease and Memorandum of Transfer of Lease, the Lessee, entered on the said land and took possession thereof on the 11/09/2006 and continued in possession.
(5)     On the 6^th day of February 2008 the said Lessee was in arrears for payment [of] rates and taxes to the said Lessor, pursuant to the covenant (2) of the said Lease, to the extent of $120.08. This amount has now been in arrears for more than five months and therefore in breach of covenant (2) in the said Lease.
(6)     Notice to remedy such breach was delivered by registered post to the Lessee, on the 6/02/2008, to the Lessee’s postal adress (sic) of 62 The Parade, Norwood SA 5067. A copy of the notice is attached hereto but I did not retain the post office registered mail receipt and is therefore not attached.
(7)     On the 14^th day of July 2008 the said Lessee was in further in arrears with payments for rates and taxes to the said Lessor, pursuant to the covenant (2) of the said Lease, to the extent of $180.12.
(8) Pursuant to the powers contained in the said lease and under the Real Property Act 1886 implied, I re-entered upon the said land and took possession thereof on the 29^th day of July 2008 and have remained in possession since.
(9)     On the 14^th of July 2008, I again posted, by registered mail, a notice to remedy such breech (sic) to the Lessee at 62 The Parade Norwood SA 5067, a copy of the notice and post office registered mail receipt for the same are attached hereto.
On 24 September 2008 Ms Collins discontinued her Magistrates Court action, advising the plaintiff by letter that her reason for doing so was that the Lands Titles Office had registered a re-entry in relation to the lease.
In December 2008 the plaintiff’s solicitors sent cheques to cover the amounts that had been sought by Ms Collins, and one of the amounts sought by Ms Benni. Both cheques were returned by the defendants. The cheques were said to be sent “under protest” with a denial of any admission that the amounts nominated in invoices were actually payable.
On 16 December 2008 these proceedings commenced.
The legislation
The statutory provisions relevant to breach of the terms of a lease and re-entry by the lessor are s 125 and s 126 of the Real Property Act 1886 (SA) (RPA) and s 10 of the Landlord and Tenant Act 1936 (SA) (LTA). Section 125 of the RPA provides powers to be implied in the lessor, including where there has been default in the fulfilment of a covenant. The section is in the following terms, with the relevant parts italicised:
125—Powers to be implied in lessor
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.
(emphasis added)
Section 126 is also relevant here because on 22 September 2008 the Registrar-General noted the re-entry of each lessor. The section provides as follows:
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.
Section 10 of the LTA stipulates that, notwithstanding the terms of any lease, a landlord may not re-enter without first serving a notice specifying the breach and requiring its remedy. It 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.
(emphasis added)
Section 11 deals with the court’s power to grant relief against forfeiture. It provides:
11—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 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.
The plaintiff’s arguments
It is convenient to deal initially with the plaintiff’s contentions regarding the first and second defendants.
The plaintiff agrees that by letter dated 6 February 2008 Ms Benni demanded payment from the plaintiff for the rates and taxes payable under the lease in the sum of $294.88. Copy rates notices and an invoice requiring payment by 22 February 2008 were enclosed under cover of her letter. The plaintiff acknowledges that no payment was made and that from 23 February 2008 it was in breach of the lease. It is accepted that this breach continued for the space of three months. The plaintiff contends that had Ms Benni given notice, as required by s 10 of the LTA, specifying the particular breach and requiring the plaintiff to remedy it within a reasonable time, then, in the absence of remedy, Ms Benni would have been entitled to re-enter and take possession of the land, at the earliest, on 23 May 2008. The plaintiff contends that her failure to do so constituted a waiver of her rights arising from the breach. It is said that, by failing to enforce the lease at that point, the first and second defendants elected to maintain the lease. It is said (in written submissions) that in issuing a further demand, dated 14 July 2008, for payment in respect of the 6 February amount, together with an additional amount of $289.68, the first and second defendants “confirmed their election to maintain the lease and waive[d] the earlier breach”.

The fresh demand for $289.68 was, again, not met. The plaintiff contends that this failure meant that from 29 July 2008 the first and second defendants were entitled to issue a notice under s 10 of the LTA in respect of that breach and would have had a right to re-enter, had the breach continued for three months.
The plaintiff argues that as at 30 July 2008, being the date of purported re-entry, the only breach of the Benni lease that had continued for three months had been waived. In deference to the disapproval of the word “waiver” in Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 by Gummow, Hayne and Kiefel JJ at [50]-[54], Senior Counsel for the plaintiff, Mr Slattery QC, provided greater specificity. He said that in issuing subsequent invoices the defendants had elected as between inconsistent rights and were thereafter estopped from relying on the earlier notices as justifying forfeiture.
Mr Slattery put the principle in the following terms. He said that where a lessor makes an election to treat a lease as being on foot, notwithstanding that the lessor has claimed that there has been a breach of the lease justifying forfeiture, the lessor cannot choose to forfeit the same lease for the same breach. The election must be by way of some act which unequivocally recognises the continued existence of the lease. Mr Slattery argued that the failure to act upon the right arising from the breach amounted to an election to keep the lease on foot. He argued that the “rule of election and estoppel” operates strictly. He relied on Consolidated Development Pty Ltd v Holt (1986) 6 NSWLR 607, a decision of Young J. He took me to a particular passage at 619, where Young J said as follows:
The only way in which rent could have been in arrears for thirty days or more as at 11 July is if the payment due on 1 April 1985 had not been made by 1 May and there had been no waiver of this breach. It was clear that a cheque was not given until 17 May, but it was not returned until 11 July, and in my view this constituted a waiver, or alternatively, an estoppel under the principle of Hughes v Metropolitan Railway Co (1877) 2 App Cas 439 at 448, preventing the lessor from relying upon the breach.
Mr Slattery further relied on Howells v Permanent Trustee Company of NSW Ltd (1956) 73 WN (NSW) 347. There the Full Court of the Supreme Court of New South Wales considered an appeal by way of stated case from a decision of a magistrate allowing a landlord to take possession of leased premises on account of a change of use of the premises which was contrary to the terms of the lease. The lessee’s change of use came to the attention of the lessor late in 1950. The lessor continued to accept rent, although in January 1951 the lessee was advised that the rent was accepted “without prejudice”. The magistrate found there had been no waiver of the breach. On appeal, the Court held that whether or not there had been a waiver was essentially a question of fact and the magistrate was required to look at the whole of the circumstances, including the acceptance of rent, to determine it. No error was found.
A parallel argument based on waiver of rights arising from breaches and election to maintain the lease is put in respect of Ms Collins’ conduct.
It is acknowledged by the plaintiff that, at the time when Ms Collins issued proceedings in the Adelaide Magistrates Court for recovery of amounts previously demanded, the plaintiff was in breach of the lease and that the breach had continued for three months. However, it is put that the institution of proceedings constituted an election to maintain the lease, rather than to determine it. It is argued that on 14 July 2008, when Ms Collins made a further demand, which included a newly accrued amount of $60.04, her election to maintain the lease was confirmed. In those circumstances it is said that there was no breach of three months duration, such as to justify re-entry on 29 July 2008.
The plaintiff also argues that the documents nominated by the defendants as purporting to comply with s 10 of the LTA were inadequate in terms of compliance with that section. In the case of the letter of Ms Benni dated 14 July 2008, the plaintiff argues that it failed to stipulate the particular breach relied upon. In the case of Ms Collins’ letter of 6 February 2008 and her letter of 14 July 2008, there was such specificity, although, as already noted, the plaintiff argues the notice was defective for other reasons.
The plaintiff further argues that the purported re-entry of the defendants was ineffectual. In respect of both purported re-entries it is said that there was no unequivocal act which gave notice of that re-entry and which asserted a right to possession and evinced an intention to determine the lease. In the case of Ms Collins, her removal of a dividing fence, or some part of it, did not amount to such an unequivocal statement of intention.
The plaintiff contends that if it makes good its argument that both Ms Benni and Ms Collins should be taken as electing not to rely on the earlier breaches, then the statutory declarations filed were in each case inaccurate since the breaches relied upon had been waived and the action of the Registrar-General noting each re-entry pursuant to s 126 of the RPA is liable to be set aside.
The plaintiff then argues that, even if its contention that there was no valid re-entry fails, the court should grant relief against forfeiture. It is put that the court has an inherent jurisdiction to grant such relief where a lessor has acted unconscionably or inequitably. The plaintiff relies on s 11 of the LTA. That section was set out earlier in these reasons. Under it, a court may grant relief in an action brought by a lessee, and the court is to have regard to the proceedings and the conduct of the parties in respect of the matters raised by s 10 of the LTA and “to all other circumstances”. The court is empowered to grant relief on such terms as the judge, in the circumstances, thinks fit: s 11(2) of the LTA. Mr Slattery referred to the “principle of proportionality” discussed by Professor Butt in Land Law (5^th ed, Law Book Co, 2006) at paragraphs 15224 and 15228. He put that the breach was minor and of relatively short duration. No damage to the defendants’ property was caused. He submitted that the leased land provided valuable amenity to the plaintiff’s land, but was relatively unimportant to the defendants. He pointed to an undertaking given by the plaintiff during the course of the trial (exhibit P10) to pay to the defendants, or to pay into court, amounts in relation to the accrued rates and taxes. In addition, counsel argued that at no stage was the plaintiff clearly put on notice by either Ms Benni or Ms Collins that failure to comply with the second covenant would jeopardise the lease. It is conceded that the plaintiff’s failure to pay the accounts was in error, but counsel submitted that Mr Horbelt was motivated by a desire to settle, once and for all, the extent of the obligation in respect of the land.
The witnesses
Much of the factual material in the trial was established by documents. There were, however, some areas of conflict in the evidence. For example, I have already mentioned the letter sent by Ms Collins on 19 November 2007 to the plaintiff. Mr Horbelt denies receiving that letter, but I prefer and accept Ms Collins’ evidence that he acknowledged receiving this letter in a conversation with her. Interestingly, Mr Horbelt claimed that he sent a letter dated 17 January 2008 to Ms Collins and she denies ever receiving it. Again, I accept Ms Collins’ evidence that she did not receive it. No doubt Mr Horbelt drafted it on his computer, indeed, a printed copy is in evidence, but I find that it was never posted.
Notwithstanding that, the letter is quite instructive as to Mr Horbelt’s attitude to the dispute with the third defendant. On the basis of this letter, as well as my acceptance of Ms Collins’ evidence about the attitude displayed by Mr Horbelt at the meeting of 5 February 2008, together with her account of Mr Horbelt’s behaviour during their discussion at the Adelaide Magistrates Court on 16 June 2008 – which occurred against the background of the defence filed on behalf of Mr Horbelt to which I have already referred – I find that at no time was Mr Horbelt prepared to pay anything towards the rates and taxes on any of the leased land. Indeed, I agree with the suggestion of counsel for the defendants and find that at all times Mr Horbelt’s attitude was to use the dispute over the second covenant to exert pressure upon the defendants to relinquish ownership of the leased land for little or no consideration.
As can be seen, I was not impressed by Mr Horbelt’s evidence. In court he misrepresented his attitude to Ms Benni and Ms Collins during the dispute as one based on a principled preparedness to pay the appropriate proportion of rates and taxes, based on the unimproved value of the leased land. In fact, his stance was neither conciliatory nor principled. Whether or not this was a deliberate misrepresentation is not of much moment. However, the terms of the filed defence, earlier set out, clearly convey the stance taken by Mr Horbelt. In evidence he tried to distance himself from the filed defence, asserting that he queried its terms with his solicitors. I do not accept that evidence. It was his defence and I do not doubt that it was drafted on the basis of his instructions. Its terms are consistent with the descriptions of his conduct and attitude provided by Ms Benni and Ms Collins, which I accept.
I was particularly impressed with the evidence of Ms Collins. I consider that she had a clear memory of most relevant interactions and, in the few instances where her memory failed her, she was very ready to say so. I was also impressed with Ms Benni’s evidence. Her memory was not as comprehensive as that of Ms Collins, but where she purported to have a memory of events, it was, in my view, reliable. I find that both women were completely honest.
Analysis
In my view there is no substance to the plaintiff’s argument that the defendants elected not to act on the earlier breaches and to continue with the leases. I do not consider that there is any inconsistency in having issued a demand, following it up with a document in the nature of a notice specifying the breach and requiring its remedy, and simultaneously issuing a demand for more recently accrued amounts. This is effectively what Ms Benni did. At the time of the second communication, being 14 July 2008, Ms Benni was not to know whether the plaintiff would forward payment for the earlier sum demanded. She was not to know whether it would become necessary to re-enter upon and take possession of the leased premises. I find that at least until the time when Ms Benni and the second defendant claimed to have re-entered the land on 30 July 2008, there was nothing inconsistent in coupling a new demand with a document in the nature of a notice to remedy breach.
I digress to discuss the form of the notices to remedy. It may be noted that no form is provided by the LTA. Section 10 of the LTA speaks of a “notice specifying the particular breach complained of, and … requiring the lessee to remedy” it. The section does not require that the lessor threaten to exercise his or her right of re-entry.
In Fox v Jolly [1916] 1 AC 1 at 17-18, Lord Atkinson noted that the knowledge which the lessee had of the demised land was not to be ignored. The notice was not required to be drafted as if to a stranger. In accepting that opinion, Street CJ, speaking for the New South Wales Full Court in Ex parte Dally-Watkins; Re Wilson (1955) 72 WN (NSW) 454 at 456 said:
The notice is not required to be regarded as a piece of sacramental ritual. It is a real notice, the object of which is to bring to the attention of the lessee the matters which are complained of and to give him the opportunity of rectifying what has taken place in the past, if it be capable of rectification. No special form of words has to be used. Schedule 6 provides a form, but it is not the only form, and the vital thing is to bring to the attention of the tenant the term of the lease alleged to have been broken and the manner in which it has been broken.
In the present case, there was only one dispute. When the plaintiff received the respective notices, there could have been no doubt as to the breach alleged and what was required to remedy it.
In Ms Benni’s case a copy of the earlier invoice was enclosed. Ms Benni’s letter was headed, in bold type, “Letter of Demand”, as opposed to “Notice to Remedy Breach”, and did not refer to s 10 of the LTA, but I do not consider that to be fatal. Ms Collins’ letter was headed “Final Notice …” and also did not refer to s 10 of the LTA. The plaintiff did not respond to either letter. In my view there was compliance with s 10 of the LTA.
The same analysis applies to the plaintiff’s argument to the effect that Ms Collins waived her rights arising from the early breaches. Having issued her original demand on 19 November 2007, she was entitled to follow it up with what she called a “final notice” and, at the same time, to demand payment of a newly accrued amount. In taking proceedings on 27 February 2008 to enforce her rights under the lease she was not abandoning her right to resort to any other remedy that the lease and her statutory rights might provide. Again, on 14 July 2008 when she reiterated her demands for the earlier amounts and issued a new demand for a similar amount, she was not abandoning any right she otherwise had.
I do not consider that the plaintiff’s reference to Consolidated Development Pty Ltd v Holt advantages it. There is very little analysis of this issue in the reasons of Young J. He decided the case on another basis. But, there, it was the retention of the lessee’s cheque for rent between 17 May and 10 July which was said to amount to a “waiver”, or alternatively, an “estoppel”, preventing subsequent reliance on the breach. Having effectively forgiven the breach, the lessor could not go on to exercise rights which could otherwise have been founded on it. That is quite different from the present circumstances where, to the plaintiff’s benefit, the defendants were prepared to reiterate their original demands, while at the same time proceeding on the basis that the plaintiff might remedy the breaches, by issuing invoices for newly accrued amounts.
The New South Wales authority of Howells v Permanent Trustee Company of NSW Ltd does not support Mr Slattery’s argument. Even though the lessor did not immediately act on the lessee’s breach of the lease in changing the use of the premises, and indeed continued to accept rent, the magistrate was held to be entitled to find that there was no waiver of the breach.
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 may be noted, as already mentioned, that, after the respective re-entries on 29 and 30 July 2008, neither Ms Collins nor Ms Benni sought any reimbursement of either rates and taxes accrued since those dates, or indeed of amounts already outstanding. Therefore there was no question of pursuing inconsistent rights in that sense either.
Accordingly, in the case of the first and second defendants, I find that a demand for monies due under the second covenant was made by letter of 6 February 2008; that the plaintiff did not respond to it; and that in compliance with s 10 of the LTA Ms Benni gave notice to the plaintiff by letter of 14 July 2008 effectively specifying the breach complained of and requiring its remedy within a reasonable time, namely 14 days. The plaintiff failed to comply with that notice, and, accordingly, the first and second defendants were, on 30 July 2008, entitled to, and did, re-enter and take possession of the land. In the case of Ms Collins, I find that she issued demands for monies due pursuant to the second covenant on 19 November 2007 and 6 February 2008, that on 14 July 2008 she complied with s 10 of the LTA by issuing a notice specifying the breaches and requiring their remedy within 14 days, and that she was entitled to, and did, re-enter and take possession of the land on 29 July 2008.
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.
I turn then to the question of relief against forfeiture.
There is a preliminary issue as to whether the plaintiff is entitled to argue first, that there has been no valid forfeiture and then, in the alternative, to seek relief against forfeiture. In Commercial Tenancy Law (Bradbook Croft & Hay, 3^rd ed, LexisNexis Butterworths, 2009) at [19.4], the learned authors cite a line of authority which would deny a litigant, particularly a plaintiff, such a luxury. However, there are authorities which are to the contrary. The authors submit (at [19.4]) that:
Where a tenant bona fide disputes that it has been in breach of an obligation it should be permitted to seek relief from forfeiture if the court ultimately makes a determination adverse to it.
I am content to assume, without deciding, that there is no bar, as a matter of law, to the plaintiff seeking relief against forfeiture in the alternative if the dispute about breach is genuine.
As seen, the court’s power to grant such relief is embodied in s 11 of the LTA. The court is given a wide discretion. The court is empowered to grant or refuse relief as it thinks fit, and then, on such terms as it thinks fit.
Relevant factors include whether the breach has been remedied or compensed and whether the tenant has undertaken to observe the relevant covenant in the future (Rose v Spicer [1911] 2 KB 234 at 241-2); the tenant’s conduct and, particularly, whether the default was wilful; the gravity of the breach; and a comparison between the value of the property and the damages (Shiloh Spinners Ltd v Harding [1973] AC 691 at 723).

Where a breach is deliberate and the offender shows no contrition, relief is not generally given: Sparta Nominees Pty Ltd v Orchard Holdings Pty Ltd [2002] WASC 54 at [253]. On the other hand, if resort by the landlord to the strict legal right of re-entry in the face of the tenant’s remedy of the breach would be unconscionable, relief would be indicated: Legione v Hateley (1983) 152 CLR 406 at 444; Leads Plus Pty Ltd v Kowho Intercontinental Pty Ltd (2000) 10 BPR 18,085.
Earlier in these reasons I set out in summary form the plaintiff’s argument as to relief. I have reached the decision that it would not be appropriate to grant such relief. It is true that the monetary amounts involved in the breaches of the leases are not great. I have not overlooked the fact that in December 2008 – some ten months after Ms Benni’s demand and twelve months after Ms Collins’ first demand – the plaintiff’s solicitors sent cheques to both women, which were returned. I further note that, after the commencement of the trial, the undertaking tendered as exhibit P10 was given. The terms of it are, in my view, problematical, but I do not need to dwell on that.
Until the time when the plaintiff’s solicitors sent those cheques there was no indication from Mr Horbelt that he was prepared to pay any amount whatsoever to anybody in compliance with the second covenant. Mr Slattery put to me that Mr Horbelt’s refusal arose from a genuine misapprehension about his obligations. It was put that Mr Horbelt “confused himself about the liability that arose under the lease”. I reject that suggestion. His education and business experience tell against it. Obviously the second covenant meant something. His position before coming to court was to deny that it gave rise to any obligation at all.
In any event, the submission is not supported by Mr Horbelt’s evidence, which was that foremost in his mind was the desire to “resolve” the situation. He meant by that not to agree on an interpretation of the second covenant but to achieve an alteration of property rights in favour of the plaintiff. As I have found, his attitude in his dealings with both women was to use what he pitched as a “dispute” or “grievance” as a lever to secure for the plaintiff a freehold interest. He succeeded in that end with Mr Tucker. Having regard to Mr Horbelt’s ongoing attitude to the dispute which he generated, to his belligerence displayed in the filed defence to the Adelaide Magistrates Court proceedings, and to the evidence which he has given before me – which has engendered no confidence on my part that he would comply with his obligations under the leases – I do not consider that there is any ground upon which to grant relief against forfeiture. Indeed, on these findings the plaintiff has not even shown that there was a bona fide dispute about breach of the lease, so as to meet the Bradbrook, Croft and Hay prerequisite to the entitlement to fall back on a claim for relief in the alternative.
The orders sought
In its amended inter partes summons the plaintiff sought the following orders.
1.A declaration that the plaintiff has a valid and subsisting lease in respect of Certificate of Title Volume 5811 Folio 177 on the terms set out in the memorandum of lease dated 30 June 1962 and previously registered as lease number 2365604.
2.A declaration that the plaintiff has a valid and subsisting lease in respect of Certificate of Title Volume 5811 Folio 178 on the terms set out in the memorandum of lease dated 30 June 1962 and previously registered as lease number 2365604.
3.Alternatively a declaration against the first defendants that there has been no lawful forfeiture of lease registered number 2365604.
4.Alternatively a declaration against the second defendant that there has been no lawful forfeiture of lease registered number 2365604.
5.Alternatively a declaration that the first defendants have unlawfully purported to forfeit lease registered number 2365604.
6.Alternatively a declaration that the second defendant has unlawfully purported to forfeit lease registered number 2365604.
7.A mandatory injunction requiring the first defendants to register against Certificate of Title 5811/178 a certain memorandum of lease made on the 30 June 1962 which lease was previously registered against the said Certificate of Title as lease number 2365604.
8.A mandatory injunction requiring the second defendant to register against Certificate of Title 5811/177 a certain memorandum of lease made on the 30 June 1962 which lease was previously registered against the said Certificate of Title as lease number 2365604.
9.A determination that the words in the memorandum of lease “if demanded by the lessor rates and taxes proportional to the land herein leased are to be the responsibility of the lessee” in memorandum of lease previously registered as number 2365604 on their proper construction mean the value of the leased land as a proportion of the value of the whole of the land.
10.In the alternative an order against the first defendants for relief against forfeiture of lease registered number 2365604.
11.In the alternative an order against the second defendant for relief against forfeiture of lease registered number 2365604.
12.Costs.
(It may be noted that in the reference to the “first defendants”, what is meant is the “first and second defendants” and in the reference to the “second defendant” what is meant is the “third defendant”.)
Because of my findings made earlier in these reasons it is unnecessary to consider the orders numbered 1 to 8 and 10 to 12. Even if such orders, or any of them, would have been appropriate in other circumstances, my findings preclude the making of them. However, that leaves number 9, which deals with the interpretation of the obligation cast by the second covenant in the lease. Since I have found that the leases have been determined by action taken by the Registrar-General, it is no longer necessary, strictly, to give my view on the meaning of the second covenant. However, in deference to the arguments that have been put to me, and in case there is further litigation between the parties, I shall briefly state my view.
The issue is the interpretation of the words “rates and taxes proportional to the land herein leased”. The defendants argue that what are the rates and taxes levied on the properties of the defendants at any particular time is a question of fact. Whether those rates and taxes are levied on the basis of improved or unimproved land is not to the point. What the lease requires in relation to each allotment is the determination of the proportion which the area of leased land bears to the entire allotment. That proportion is then to be applied to the rates and taxes levied on that allotment and it is the product of that multiplication which is the responsibility of the lessee.
On the other hand, the argument put by the plaintiff for the first time in this trial, is, as I understand it, that the relevant ratio, or proportion, is the value of the leased land as against the value of the entire, unimproved allotment. Having determined that ratio, it is then necessary to apply it to the rates and taxes levied, but using the rateable charge for unimproved land. Thus, it is a two-stage process.
Senior Counsel for the plaintiff put the argument in these terms. He argues that the expression “rates and taxes proportional to the land leased” does not address the question of how the rates and taxes are to be calculated; that is, to what land value the rating figure is to be applied. He argues that the clear inference from the terms of the lease is that the rating figure (as determined by the charging authority) must be applied to the relevant proportion of the unimproved value of the lessee’s land. He argues that the word “proportional” as it appears in the second covenant is “adverbial” in the sense that it requires something to be done to determine what is the amount payable in respect of the land. That the relevant proportion should be applied to the value for unimproved land, rather than capital value, flows, counsel argues, from the fact that the first covenant requires the leased land to be used only as a garden. The lease does not allow any capital improvements on the tenement. He argues, as well, that it would be quite unjust for the lessee to be responsible for rates and taxes inflated by improvements made by the lessor, which are of no benefit to the lessee, and which cannot extend to the leased land.
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.
Accordingly, had I considered it to be necessary and appropriate to give my view as to the correct interpretation of the lease, it would have been to this effect. In the circumstances, I do not propose to make any declaration.
Conclusion
The plaintiff has not succeeded in any of its claims.
The summons is dismissed.
I shall hear the parties as to costs.