Interslice Pty Ltd v CCA Investments - Bass Hill Pty Ltd

Case •

[2025] NSWCA 175

•

04 August 2025

Court of Appeal


Supreme Court


New South Wales

  • Summary available
Medium Neutral Citation: Interslice Pty Ltd v CCA Investments – Bass Hill Pty Ltd [2025] NSWCA 175
Hearing dates: 16 December 2024
Date of orders: 4 August 2025
Decision date: 04 August 2025
Before: Ward P at [1];
Leeming JA at [7];
McHugh JA at [58]
Decision:

(1)   Appeal allowed in respect of Ground 4.

(2)   Set aside:

(a)   declaration 1 and orders 2(b) and 3 of the orders made on 8 May 2024 by Richmond J; and

(b)   orders 1 and 2 of the orders made on 23 May 2024 by Richmond J.

(3)   In lieu thereof:

(a)   declare that the lease between the defendant as lessor and the plaintiff as lessee in respect of the premises comprised in part folio identifier 101/1053893 located at lower ground floor, 330 Hector Street, Bass Hill, New South Wales has been validly terminated by the plaintiff;

(b)   order that judgment be entered for the plaintiff against the defendant on the amended statement of claim in the sum of $10;

(c)   subject to any costs orders already made, order that the plaintiff pay the defendant’s costs of the proceedings on the plaintiff’s claim at first instance;

(d)   subject to any costs orders already made, order that the defendant pay the plaintiff’s costs of the defendant’s cross-claim at first instance;

(e)   otherwise dismiss the proceedings on the amended statement of claim;

(f)   dismiss the cross-claim.

(4)   The amended notice of appeal otherwise be dismissed.

(5)   The notice of contention be dismissed.

(6)   There be no order as to the costs of the proceedings in this Court.

Catchwords:

ENVIRONMENT AND PLANNING — Construction of consent — Whether use for the purpose of a gym separate and independent from use for the purpose of a registered club

CONTRACT — Termination — Repudiation of contract — Whether failure to issue lease in registrable form was repudiation

CONTRACT — Remedies — Damages — Anticipatory breach — Whether party ready, willing and able to perform obligation to enter new lease — Loss of opportunity — Whether the commercial opportunity denied by repudiation had any value

Legislation Cited:

Conveyancing Act1919 (NSW), ss, 118, 127, 129 133E

Environmental Planning and Assessment Act 1979 (NSW), Pt 4, Div 4.11

Real Property Act 1900 (NSW), s 41

Registered Clubs Act 1976 (NSW), ss 45, 31

Bankstown Local Environmental Plan 2001 (NSW)

Bankstown Local Environmental Plan 2015 (NSW)

Smoke-Free Environment Regulation 2007 (NSW)

Cases Cited:

Akins v National Australia Bank (1994) 34 NSWLR 155

AMT Planning Consultants Pty Ltd t/as Coastplan Consulting v Central Coast Council [2018] NSWCA 289

Bardsley-Smith v Penrith City Council (2013) 195 LGERA 34; [2013] NSWCA 200

Baulkham Hills Shire Council v O’Donnell (1990) 69 LGRA 404

Blacktown Workers’ Club Ltd v O’Shannessy [2011] NSWCA 265

Botany Bay City Council v Parangool Pty Ltd [2009] NSWLEC 198

Bunderra Holdings Pty Ltd v Pasminco Cockle Creek Smelter Pty Ltd (2017) 96 NSWLR 434; [2017] NSWCA 263

Chan v Cresdon Pty Ltd (1989) 168 CLR 242; [1989] HCA 63

Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54

DCT Projects Pty Limited v Champion Homes Sales Pty Limited [2016] NSWCA 117

DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423

Foodbarn Pty Ltd v Solicitor-General (NSW) (1975) 32 LGRA 157

Foranv Wight (1989) 168 CLR 385; [1989] HCA 51

Hunter Industrial Rental Equipment Pty Ltd v Dungog Shire Council (2019) 101 NSWLR 1; [2019] NSWCA 147

Jojeni Investments Pty Ltd v Mosman Municipal Council (2015) 89 NSWLR 760; [2015] NSWCA 147

Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623; [1989] HCA 23

MM & SW Enterprises Pty Ltd v Strathfield Council (2010) 172 LGERA 125; [2010] NSWLEC 8

Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4

Shire of Perth v O’Keefe (1964) 110 CLR 529; [1964] HCA 37

Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR(NSW) 632

Upside Property Group Pty Ltd v Tekin [2017] NSWCA 336; (2017) 19 BPR 38,137

Wesiak v D&R Constructions (Aust) Pty Ltd [2016] NSWCA 353

Young v Lamb [2001] NSWCA 225; 10 BPR 97,867

Category:Principal judgment
Parties: Interslice Pty Ltd ACN 601 103 226 (Appellant)
CCA Investments – Bass Hill Pty Ltd ACN 634 907 369 (First respondent)
Danka Bakic (Second respondent)
David Robinson (Third respondent)
Representation:

Counsel:
T F Robertson SC, D J A Mackay (Appellant)
A Leopold SC, R Clark (First respondent)

Solicitors:
Integrated Legal (Appellant)
Mitry Lawyers (First respondent)
Integrated Legal (Second and third respondent)
File Number(s): 2024/202851
Publication restriction: Nil.
 Decision under appeal 
Court or tribunal:
Supreme Court of New South Wales
Jurisdiction:
Equity
Citation:

Interslice Pty Ltd v CCA Investments – Bass Hill Pty Ltd (No 2) [2024] NSWSC 481

Date of Decision:
1 May 2024
Before:
Richmond J
File Number(s):
2020/337486

HEADNOTE

[This headnote is not to be read as part of the judgment]

The appellant, Interslice Pty Ltd (the Tenant), entered a five year registered lease (Original Lease) with the City of Bankstown R & SL Community Club Ltd (the Club) which was the owner of land at Bass Hill (the Land). The Tenant thereafter operated a gym from part of the lower ground floor of the Club’s building (the Premises).

The Original Lease contained an option to renew for a further five years. The Tenant exercised the option, with the new lease to commence on 16 October 2019. On 13 September 2019, the Club sold the Land to the respondent, CCA Investments – Bass Hill Pty Ltd (the Landlord). The Landlord never provided a new lease in registrable form to the Tenant. The Tenant continued to occupy the Premises until 28 April 2020. It was common ground that the Tenant’s occupation was pursuant to an equitable lease on similar terms to the Original Lease.

Clause 10.1(a)(ii) of the Original Lease provided that the Tenant must obtain, keep current and comply with all consents, approvals and licenses from all relevant authorities necessary or incidental to the use of the Premises for the permitted use of “Health and fitness centre (including crèche)”. Under the Bankstown Local Environmental Plan 2001 (LEP 2001), which was in force when the Original Lease was entered, use of the Land for the purpose of registered clubs and recreation facilities (including a gym) was prohibited except where the Bankstown City Council (the Council) granted consent. In 2006 the Council issued a development consent which permitted “Refurbishment to Existing Bass Hill RSL Club Including Internal Alterations and Construction of Health Club, Children’s Play Area and Rear External Terrace” (the Consent). After the introduction of the Bankstown Local Environmental Plan 2015, which replaced LEP 2001, it was lawful to use the Land in accordance with the Consent only if it was an “existing use” under the Environmental Planning and Assessment Act 1917 (NSW).

In 2020 the relationship between the Tenant and the Landlord broke down. The Tenant claimed that the Landlord had repudiated the lease (for reasons including the Landlord’s failure to deliver a new lease in registrable form), which repudiation the Tenant purported to accept. The Tenant commenced proceedings against the Landlord and the Landlord cross-claimed. The primary judge found that the Tenant was in breach of cl 10.1(a)(ii) of the equitable lease because the Consent only approved the operation of the gym as part of the Club, and once the Club ceased operation the existing use approved in the Consent was abandoned. His Honour found that the Tenant’s purported termination was a repudiation of the equitable lease, which the Landlord had validly terminated.

The Tenant raised three main issues on appeal: (1) whether the Consent properly construed approved a separate and independent use of the Premises as a gym that survived the cessation of the use of the rest of the building as a registered club; (2) whether the Landlord had repudiated the lease; and (3) whether the Tenant should be awarded substantial damages.

The Court held (McHugh JA, Ward P and Leeming JA agreeing) allowing the appeal in part and otherwise dismissing the appeal:

Issue 1

  1. Per Leeming JA (Ward P and McHugh JA agreeing) The Consent extended to a change in use of the Premises (i.e., part of the lower ground floor of the Club’s building) to a gym: [1] Ward P; [15]-[21], Leeming JA; [88] McHugh JA.

    Foodbarn Pty Ltd v Solicitor-General (NSW) (1975) 32 LGRA 157; Bardsley-Smith v Penrith City Council (2013) 195 LGERA 34; [2013] NSWCA 200; Baulkham Hills Shire Council v O’Donnell (1990) 69 LGRA 404, cited.

  2. Per Leeming JA and McHugh JA (Ward P agreeing) The text of the Consent, the development application and other contemporaneous documents incorporated into the Consent demonstrate that the use of the Premises for the purpose of a gym was inextricably bound up with the use of the rest of the Land as a registered club. The use of the Premises as a gym did not survive independently of the use for the purpose of a registered club: [1] Ward P; [22]-[48] Leeming JA; [72]-[73]; [86]-[99], [100]-[109] McHugh JA.

    Jojeni Investments Pty Ltd v Mosman Municipal Council (2015) 89 NSWLR 760; [2015] NSWCA 147; Bunderra Holdings Pty Ltd v Pasminco Cockle Creek Smelter Pty Ltd (2017) 96 NSWLR 434; [2017] NSWCA 263; Hunter Industrial Rental Equipment Pty Ltd v Dungog Shire Council (2019) 101 NSWLR 1; [2019] NSWCA 147, applied.

Issue 2

  1. Per Ward P Upon valid exercise of the option there came into existence a binding agreement for lease on the terms provided for in the Original Lease. That binding agreement for lease would, if specifically enforceable, be regarded in equity as an equitable lease. The Landlord was contractually obliged to issue a new lease in registrable form to the Tenant within a reasonable time. The Landlord’s failure to do so was both a repudiation of the contractual obligation under the Original Lease and of an implied obligation under the equitable lease: [2]-[4].

    Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623; [1989] HCA 23, applied.

  2. Per Leeming JA and McHugh JA There was repudiation by the Landlord in failing to supply a registrable lease. Once the option was exercised, the Landlord had an unconditional obligation under the agreement for lease contained in the Original Lease to deliver a new lease in registrable form within reasonable time: [52]-[53] Leeming JA; [119]-[122], [170], [208] McHugh JA.

    Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623; [1989] HCA 23, applied.

  3. Per Leeming JA and McHugh JA Upon exercise of the option, to the extent equity would enforce the binding agreement for lease in the Original Lease, there came into existence a lease in equity on the same terms as the new lease that the parties were bound to enter: [52] Leeming JA; [123], [194] McHugh JA.

    Chan v Cresdon Pty Ltd (1989) 168 CLR 242; [1989] HCA 63, cited.

  4. Per Leeming JA The Tenant’s reasonably arguable albeit erroneous claim that it was entitled to continue to operate a gym did not disentitle it from accepting the Landlord’s repudiation: [54].

  5. Per McHugh JA The Tenant’s breach of cl 10.1(a)(ii) of the equitable lease did not disentitle it from terminating the Original Lease and the unconditional agreement for lease contained within it. A breach of the equitable lease was distinct from a breach of the agreement for lease contained within the Original Lease: [225]-[236].

    DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; [1978] HCA 12; Wesiak v D&R Constructions (Aust) Pty Ltd [2016] NSWCA 353, considered.

Issue 3

  1. Per McHugh JA (Ward P and Leeming JA agreeing) The Tenant was only entitled to nominal damages. There was no basis upon which to conclude that the commercial opportunity which the Landlord’s repudiation denied to the Tenant had any value: [5] Ward P; [56] Leeming JA; [253]-[267]; [278]-[286] McHugh JA.

    Upside Property Group Pty Ltd v Tekin [2017] NSWCA 336; (2017) BPR 38,137, applied.

    Foran v Wight (1989) 168 CLR 385; [1989] HCA 51; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4, cited.

JUDGMENT

  1. WARD P: I have had the considerable benefit of reading in draft the respective judgments of Leeming JA and McHugh JA and therefore can be brief in what follows. I agree, for the reasons given by McHugh JA and supplemented by Leeming JA, that grounds 1, 2 and 2A (going to the planning issues raised by the appeal) are not made good.

  2. As to the issues raised by grounds 3 and 4, concerning breach and repudiation, I would express my conclusion as follows, generally adopting the definitions used by McHugh JA. On the valid exercise (which was conceded) of the option contained in the Original Lease, there came into existence a binding agreement for lease on the terms provided for by cl 2.2(b) of the Original Lease. That binding agreement for lease (which might be referred to colloquially as the option lease) would, if specifically enforceable, be regarded in equity as an equitable lease.

  3. Whether expressly (pursuant to the obligation in cl 2.2, which was clearly intended to have continuing operation after the cessation by effluxion of time of the Original Lease) or, as in my opinion would also be the case, pursuant to an implied obligation arising under the binding agreement to grant a lease of Torrens title land for a period of in excess of two years, CCA (the Landlord) was obliged, on the valid exercise of the option, to issue a new lease in registrable form to Interslice (the Tenant) within a reasonable time (see Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623; [1989] HCA 23). It failed to do so. To my mind, that was both a repudiation of the contractual obligation under the Original Lease and of the implied obligation arising under the equitable (or option) lease.

  4. The lack of clarity in the communications between the parties (to which McHugh JA has referred) gave rise to debate as to whether the failure to issue or grant a new lease in registrable form was a repudiation of the Original Lease (cl 2.2) or the equitable lease arising from the valid exercise of the option (see, for example, the letter dated 14 April 2020 from the Landlord’s solicitors to which McHugh JA has referred at [163] below). However, both possibilities were encompassed by the pleadings, as McHugh JA has noted, and in my opinion the repudiation extended to both scenarios.

  5. Therefore, while I have some difficulty with the proposition (see [208](3); [220]) that the obligation to issue a new lease in registrable form arose only under the Original Lease, nothing here turns on this. The Landlord clearly repudiated its obligation to issue the new lease in registrable form and I therefore agree with the conclusion reached by McHugh JA that grounds 3 and 4 are not made good. I also agree with his Honour’s conclusion as to ground 5, for the reasons his Honour gives.

  6. Thus, I agree with the orders proposed by McHugh JA.

  7. LEEMING JA: I agree with the orders proposed by McHugh JA. What follows presupposes familiarity with his Honour’s reasons.

  8. As McHugh JA has explained in more detail, in October 2014 the appellant Interslice took a registered five year lease with a five year option from the City of Bankstown R & SL Community Club Ltd (“Club”), the then owner of the land at Bass Hill. It thereafter operated a gym occupying much of the lower ground floor of the Club’s building. That part of the building had been refurbished for the purpose of a “Health Club” pursuant to development consent granted in 2006. Interslice obtained its lease at around the same time that it acquired a gym business from a previous corporate tenant of the lower ground floor.

  9. The Club sold the land to the respondent CCA on 13 September 2019, shortly before the expiry of the lease. It has been at all times accepted that Interslice validly exercised its option for a further lease. After CCA acquired the land, a registered club ceased to operate.

The significance of the planning issues and why they are complex

  1. Although the ultimate legal issues at trial and in this Court were whether Interslice or CCA repudiated the lease, and whether substantial damages had been established, on the view I take the most important questions in this appeal concern planning law. They are whether Interslice was authorised under the 2006 consent to operate a gym from the leased premises in circumstances where the building was no longer being used as a registered club, and if not, whether the use of the leased premises as a gym was protected by the “Existing uses” provisions of Part 4 Div 4.11 of the Environmental Planning and Assessment Act 1979 (NSW). The primary judge determined both questions adversely to Interslice. They are in substance dispositive of this appeal, because if Interslice could not lawfully operate a gym within a building that no longer operated as a registered club, it was in breach of its lease and could not obtain substantial compensation for CCA’s repudiation.

  2. Those issues are distinct but related. They are distinct, at least insofar as the focus of the former was the terms of the development consent granted in 2006, while the focus of the latter is on the activities lawfully conducted on the lower ground floor of the building. But in the circumstances of this appeal, little turns on that distinction. In any event, central to both is the legal character of the use which was authorised by the 2006 consent. The legal characterisation of that use is complicated and contestable for at least three reasons.

  3. First, little attention was given 19 years ago to the possibility that what was originally contemplated as but one aspect of the suite of facilities provided to users of the club (principally, club members) might in the future continue to be provided after the rest of the building had ceased to be used as a registered club. Thus the question of construction whether the use is severable involves construing words which were not directed to this contingency (making it no different from many questions of contractual construction).

  4. Secondly, it is necessary to characterise the approved use of the lower level of the building for a purpose, and that may be done at various levels of generality or particularity (for example, as a “gym” or as a “health club for RSL members”). As was observed in Jojeni Investments Pty Ltd v Mosman Municipal Council (2015) 89 NSWLR 760; [2015] NSWCA 147 (where the issue was whether the existing use was “building containing flats” as opposed to “building containing two flats”), there are no categorical rules to direct judges about the selection of appropriate levels of generality.

  5. The third reason is a consequence of a change in the planning regime governing the use of the land between 2006 when the consent was granted and in 2019 when the club ceased to operate. Under the Bankstown Local Environmental Plan 2001, which was in force when the 2006 consent was granted, the land was zoned 2(a) “Residential A”, and the use of the premises either as a “Registered club” or as a “Recreation facility” was expressly prohibited under cl 11, notwithstanding which cl 12 permitted consent to be given in certain cases. The result is that the use of the Club premises in 2006 was authorised under (former) s 109 as an “other lawful use” rather than (former) s 107 as an existing use. However, the Bankstown Local Environmental Plan 2015 came into force with effect from 5 March 2015. It repealed the 2001 LEP, and the land became zoned R2 Low Density. Use of the land as either a club or a gym remained prohibited, but, significantly, there was no counterpart to cl 12 of the former LEP. Although it continued to be lawful to use the land in accordance with the 2006 consent, that was only because it was an “existing use” authorised by (former) s 107. I shall return towards the end of these reasons to the possible significance of this.

The 2006 consent was for a change of use

  1. The point of the foregoing is to identify why the issues in this appeal are complicated and to permit attention to be focussed on the issues that matter. What matters for the purposes of this appeal is that in 2006 the Club was not merely seeking development consent for the carrying out of structural work to convert the lower ground floor into a health club (as well as making a suite of other changes including a children’s play area and a rear external terrace). The Club was seeking a change of use. As Interslice emphasised in its submissions, it is to be steadily borne in mind that “development” for the purposes of the Environmental Planning and Assessment Act extends to “the use of land” as well as “the carrying out of a work” (see former s 4 and current s 1.5). However, the primary judge is not fairly to be criticised for proceeding on the basis that the development application was merely to approve works, for the documents making it clear that a change of use was also sought were only tendered in this Court. Nonetheless, the critical question as I see it is whether there was a “separate and independent use” of the lower ground floor for a gym authorised by the 2006 development consent, which survived the cessation of the use of the rest of the site as a registered club.

  2. The starting point is to describe how that use came to be approved. As it turns out, that is sufficient to resolve the main issues in this appeal, without the need to consider the effect of the 2015 LEP.

  3. The “Description of development” in the Council’s consent was confined to a description of the building works, but the conditions extended to the change in use of the lower ground floor. Condition 31 reflected the need to review the ventilation, so as to comply with AS 1668.2 (which in part turns on the average metabolic rate of its occupants; more air supply is needed for an enclosed space which is used as a gym than for the same space used as a lounge and billiards room). More importantly for present purposes, condition 2 required compliance with the parking assessment, and condition 30 required six additional car parking spaces, in accordance with an assessment of the use of the gym. I shall return to this.

  4. There is no doubt that the development application extended to a change in use. That was obvious insofar as the lower ground floor would cease to be a lounge and would become a gym. It was express on the face of the parking assessment accompanying the development application, which described itself as “for refurbishment and reorganisation of the ground floor lounge areas and a change of use in the lower ground floor from lounge/bar/billiards room to a health club (gymnasium)”. McHugh JA has described cl 12 of the 2001 LEP which permitted consent to be granted to a proposed development which was prohibited, which would include the use of part of the Club’s building for a gym.

Was the use approved by the 2006 consent “separate and independent”?

  1. Was the use of the lower ground floor which was approved in 2006 “separate and independent”, as Interslice contended, so that it survived the cessation of the use of the rest of the building as a club? Where use of part of the land is regarded as being wholly ancillary to the dominant use of the land as a registered club, it may be put to one side as a subject for separate assessment, in accordance with Foodbarn Pty Ltd v Solicitor-General (NSW) (1975) 32 LGRA 157 at 161; see also Bardsley-Smith v Penrith City Council (2013) 195 LGERA 34; [2013] NSWCA 200 at [90]. This appears to have been an issue at trial, and was reflected in opinions expressed by a planner called by CCA. But the Statement of Environmental Effects made it clear that there would be a separate assessment of the new use of the lower ground floor as a health club, with particular focus on its impact upon carparking. The need for a parking study was raised at a meeting on 25 May 2006 (prior to lodging a development application) where the Club’s representatives identified two “main alterations”, namely, “Refurbishment and reorganisation of ground floor lounge areas” and “Change of use of the sub-ground floor of the premises from lounge/bar area to gym area for a boutique style gym”. The result was the car parking assessment referred to above which in turn became reflected in a condition of consent. Two other documents corroborate this:

  1. the Council officers assessing the application treated it as involving “a ‘change of use’ from a bar area to a gym” with the result that it was no longer for Building Code purposes a Class 9B place of public entertainment but became a Class 9B assembly building, and

  2. in 2009, when a “checklist” for a construction certificate concerning the gym was being prepared, the question “Does the proposal involve a change of building use?” was answered “Yes” and there is a handwritten entry “Class 6 Part (Gym)”.

  1. Hence, consistently with Interslice’s submissions in this Court, the new use of the lower ground floor as a gym was treated as separate, rather than subsumed within the dominant use of the land as a registered club.

  2. But whether a use is independent is not answered merely by asking whether it is “ancillary” to the use of the land as a club, although that may be a relevant inquiry. This was Meagher JA’s point in Baulkham Hills Shire Council v O’Donnell (1990) 69 LGRA 404 at 409-410, holding that this was instead a question of fact and degree in all the circumstances of the case. A publisher opening a sales room at the publishing house was said to give rise to an independent use, although one that was ancillary to the publishing use. Meagher JA (with whom Samuels AP and Clarke JA agreed) contrasted a canteen installed in a factory for workers, or the use of land by a resident for parking a motor car at his or her home: in those cases there was no independent use of operating a restaurant or a car park.

  3. Applying those principles, I have concluded that the primary judge was correct to conclude that the use of the lower ground floor for the purpose of a gym was not severable from the use of the rest of the land for the purpose of a registered club.

The text of the consent

  1. First, there is the ordinary meaning of the words of the consent “Refurbishment to Existing Bass Hill RSL Club Including Internal Alterations and Construction of Health Club, Children’s Play Area and Rear External Terrace”. The sense of the phrase is of four particular works all of which are part of the Club. It is moderately clear that the “Rear External Terrace” was closely connected, and indeed inseparable from, the use of the land as a club. It was described by the consultant retained by the Club as “A smokers terrace is proposed at the rear of the building”, and the timing coincides with changes in the laws concerning smoke-free areas in registered clubs, including the Smoke-Free Environment Regulation 2007 (NSW) (aspects of which are mentioned in Blacktown Workers’ Club Ltd v O’Shannessy [2011] NSWCA 265). Likewise, the “Children’s Play Area” was merely an enclosed room near the bistro, which was wholly dependent upon other aspects of the club premises (such as parking and bathrooms) and was evidently a minor additional facility provided to people using the club.

  2. Considered merely as a matter of the language in the consent, the “Health Club” is treated in the same was as “Children’s Play Area” and “Rear External Terrace”. That is to say, all three are matters included within the refurbishment of the existing club. That conclusion does not turn on whether the reference to the “Existing Bass Hill RSL Club” is to the building or to its owner, nor on the words “including”, but on the simple fact that the three things whose construction was authorised (“Health Club”, “Children’s Play Area” and “Rear External Terrace”) were all treated grammatically in the same way, suggesting that the first has the same relationship to the operations of the existing club as the second and third undoubtedly do.

The nature of the development

  1. Secondly, a deal of time during the hearing was occupied by both sides’ analyses of the approved plans (which were slightly different from those which had been before the primary judge), with a view to contending that the gym was or was not “completely self-contained” and had its own entry. (Indeed, slightly more than half of the hearing was occupied by Interslice’s application to adduce further evidence concerning the planning process in 2006, to which the Court acceded shortly before lunch.) I think that the better view of the plans is that they are for a space which was separate from the other areas of the Club, and were designed around there being an entrance and exit to and from the gym directly via the rear doors to the carpark. Favourably to Interslice, I would accept that that is a differentiating feature from the Children’s Play Area and Rear External Terrace. But it is not dispositive. The design choice to permit direct movement between the gym and the car park, which avoided the need for users of the gym to pass through the parts of the building occupied by the registered club, was obvious and sensible. But it does not compel the conclusion that the use of the lower ground floor was separable from the use of the rest of the land as a registered club. To the contrary, it highlights something which was obvious to everyone at the time, which was that the operation of the gym involved use of the existing car parking.

Car parking by users of the gym

  1. Thirdly, the configuration of the alterations to the lower ground floor, and in particular the connection between Health Club and carpark via the rear doors, directs attention to something that was considered extensively in 2006, namely, car parking. Most of the land owned by the Club was used for car parking. The 2006 Construction Certificate stated that the existing floor area of the building was 2349 m2, with the ground floor occupying 1516 m2 and the lower ground floor some 833 m2. But the “Health Club” did not occupy all of the lower ground floor, and according to the parking assessment (which used its area to determine likely patronage) it had a gross floor area of 559 m2. The Construction Certificate also stated that the land area was 4,537 m2. That is to say, the footprint of the Club building occupied somewhat less than 50% of the land, most of the rest of the land was devoted to carparking, and the area to be occupied by the gym was some 12% of the land. The foregoing is probably clearer from an earlier plan of the site in evidence:

  1. The stamp on that plan indicates it was part of the approval of a development application DA-1295/2004. The parking assessment which accompanied the 2006 application, and with which condition 2 of the 2006 consent provided that the development must comply, stated:

A Development Application (DA-1295/2004) for refurbishment was submitted to Bankstown City Council and approved with Conditions on 8th March 2005. Condition 3 required 67 car spaces to be provided and made available for car parking at all times. It is not known how the number of parking spaces was calculated.

  1. Thus, when development consent issued in 2006, most of the land was used for parking, and at all times the assessment of the effect on parking was at the forefront of the assessment of the application.

  2. At the Development Committee Unit meeting on 25 May 2006, carparking was discussed, with a view to assessing an obvious impact of the proposed change: many gym users would travel by car, and their numbers and especially the timing of their visits would affect the adequacy of the existing parking. That led to the parking assessment prepared by Lyle Marshall & Associates accompanying the development application, which emphasised that gym users were likely to attend in the mornings, and in the early days of the week, away from peak usage of the registered club facilities at meal times, in the evening and towards the end of the week. The report concluded that it was possible easily and lawfully to mark an additional six parallel parking spaces along the exit driveway which was wider than necessary, and (by a happy coincidence):

The additional 6 spaces in our opinion will cater for the increased parking demand generated by the Health Club using the RTA Desirable Parking Provision on all days of the week.

  1. Evidently, condition 2(a) of the consent, for six carparking spaces to be provided in accordance with the report from Lyle Marshall and Associates Pty Ltd, reflected that assessment.

  2. This material points in two directions. On the one hand, it is, as Interslice contended, powerful evidence that the Club’s application included a change of use which was separately assessed and approved. But on the other hand, it also leads to the conclusion that the development application in 2006 was assessed, in relation to an obvious and important impact, as inextricably linked to the use of the majority of the land for parking. No consideration was given to the carparking impact of the use of part of the land as a free-standing gym (ie the gym’s impact on nearby parking if gym users were not free to park on land owned by the Club).

  3. The development consent was to be construed having regard to its enduring nature, and as a document intended to achieve practical results: see Bunderra Holdings Pty Ltd v Pasminco Cockle Creek Smelter Pty Ltd (2017) 96 NSWLR 434; [2017] NSWCA 263 at [158(2) and (3)]. The 2006 consent authorised the use of the lower ground floor as a gym, for users most of whom would use the carparking on the Club’s land. The use of the carpark was an important aspect of the assessment, and of the conditions imposed on the landowner in order to permit the development to proceed. All this suggests that the use should not be understood as a free-standing gym, without any entitlement for users to park on the Club’s land.

Reference to users of the gym as “members and guests”

  1. Fourthly, there is a point about references to “members and guests” in the Statement of Environmental Effects. Interslice made submissions in this Court concerning the distinction between “patrons” and “members” in the Statement of Environmental Effects (saying without opposition that it was common ground that regard could be had to that document for the purpose of construing the consent, as the primary judge noted at [87]). This was a challenge to the reasoning of the primary judge at [87]-[88], which was as follows:

87 … the parties agreed that regard could be had to the SEE in construing the Consent, on the basis that this was one of the documents submitted by Paynter Dixon Constructions Pty Ltd as part of the DA and hence is a document incorporated by reference into the Consent due to Condition 2 (see the first principle stated in Bunderra set out above). Approaching the matter on this basis, in my view, there is nothing in the SEE which is contrary to the conclusion I have reached on the basis of the first two matters set out above. The SEE serves only to confirm what is apparent from the terms of the Consent itself, read with the drawings, is the correct construction. In particular, the SEE begins with the following:

This Statement of Environmental Effects has been prepared by Andrew Martin Planning Pty Ltd at the request of Paynter Dixon on behalf of Bass Hill RSL Club (the ‘Club’) to accompany a Development Application for a rear external terrace, increase to patron numbers permitted within the existing terrace fronting Hector Street, internal kids play area, alternations and lower level health club.

In order to address current trends and legislative requirements the Club must modify the existing floor areas. The Club now must consider other more suitable uses for the existing licensed area such as the inclusion of a kids play area. The change in strategy is partly prompted by the proposed banning of smoking within licensed clubs in 2007.

The existing lower level is proposed to be converted to a health club which is to serve members and guests. There is no increase in the gross floor area (GFA) of the building and in fact the licensed area is reduced.

88 The last paragraph refers to the health club and states that it is to serve “members and guests”. Although the plaintiff submitted to the contrary, in my view it is clear that the members and guests being referred to are members of the RSL Club and their guests. There is also a reference in this paragraph to the licensed area being reduced and this is picked up in the conclusion to the SEE which states that: “There is no intensification of use given that the gross floor area does not increase, and the proposed health club replaces what was previously licensed area”. This suggests that the health club is put forward as part of the RSL Club as it replaces the licensed area of the RSL Club.

  1. Interslice said this was wrong:

In light of the use of the distinction between members and guests of the health club and club patrons, had it been intended that the health club be only for club patrons, the kind of image which is brought up in part of my learned friend’s submissions of clubs, which have internalised gymnasiums, then the reference would have been to patrons of the club using the gym, and that’s not the case, and we submit that his Honour misconstrued the SEE at that point.

  1. The submission was directed to the distinction in the document between “patrons” and “members and guests”. Interslice maintained that the former referred to people using the registered club, and the latter to people using the gym.

  2. This is, at least to my mind, a very small point. But I have concluded that the primary judge was correct. The short points are that:

  1. “members and guests” is a natural description of users of the registered club;

  2. at least for all the time that Interslice was a tenant, all gym users were required to be club members;

  3. even if (as such evidence as there is suggests) there was no similar requirement upon the previous tenant, it is clear that gym users would need to use, and did use, the club’s car park, just as had been assessed by the Council in 2006 and as was reflected in the conditions imposed by the Council.

  1. Under the Registered Clubs Act 1976 (NSW) in the form it took in 2006, only members (including temporary members) and their guests could lawfully use club facilities or amenities provided on the premises of a registered club: s 45. Section 31 required (both in 2006 and today) a club to keep, for three years, a register of members and their guests. Plainly, the terminology of “members and guests” in the Statement of Environmental Effects was apt to refer to users of the registered club. In contrast, it is awkward to refer to a “guest” of a member of a gym (a suggestion in argument that a “guest” might use the café indicated on the plans is an unlikely justification). The primary judge was correct to regard the reference in the Statement of Environmental Effects to the gym being to “serve members and their guests” as indicating the relationship between the two: the gym was one of the facilities available to users of the Club.

  2. In fact, Interslice’s 2014 lease reflected a close connection with the membership of the Club. Interslice promised (in cl 10.4) that club members would not be charged a joining fee, and would be “entitled to a 10% discount on membership fees for the Health and Fitness Centre”. Further, all management staff of the Club were entitled to free membership, with no joining fee, of the Health and Fitness Centre, and other staff were entitled to a 30% discount on membership fees, with no joining fee.

  3. Still further, cl 10.4(b) provided that:

The Tenant must ensure that every person who becomes a member [of] the Health and Fitness Centre (who is not a member of the Landlord) must become a member of the Landlord (at the cost of the Tenant).

  1. The lease made no express provision for the entitlement of the tenant’s users to use the Club’s carpark (there were provisions permitting Interslice and its employees and agents to use the common property, which might include the carpark, but even if it did, that did not extend to gym users). But it is evident that users of the gym – all of whom would be members of the Club – would use, and would be entitled to use, the existing carparking (plus the additional six spaces the Club would provide as the price of being permitted to change the use of the lower ground floor).

  1. The terms of the previous lease were not in evidence, although an historical title search shows that a lease was registered on 21 May 2010. The same search shows no earlier registered lease after the completion of the refurbishment of the lower ground floor.

  2. The contemporaneous documentary evidence enables some inferences to be drawn about what occurred prior to 2010. An occupation certificate for “Function Room & Rear External Terrace” issued on 27 July 2007. On the copy in evidence is handwriting “Final OC cannot be issued” and “This CC superseded by CC 377/08 (children’s play and terrace) & CC 380/09 (health club)”. The latter construction certificate does not appear to have been in evidence, but a “Checklist” for it was included in the tender in this Court and is dated 20 August 2009. It was tendered because one line records the change of use mentioned above, but it also confirms that the construction certificate did not issue before August 2009. That, together with the notation that an occupation certificate could not be issued, suggests that the lower ground floor was not used before late 2009.

  3. There was also testimonial evidence that (a) the refurbishment was complete in 2009, (b) in 2010 the Club entered into a commercial lease of the lower ground floor to “Definition Fitness”, (c) also in 2010 the Club applied to exclude the lower ground floor area from its licensed area, (d) the lease to Definition Fitness contained a term that the health and fitness centre members did not need to be members of the Club, (e) Harrycorp Pty Ltd trading as Move Fitness entered into a lease in 2013 as a commercial tenant, and (f) cl 10.4 was added to the lease in 2014.

  4. It is not clear whether the gym was ever operated directly by employees or agents of the Club after an occupation certificate issued (at some time late in 2009) prior to the lease which was registered in May 2010. Certainly, the 2006 consent permitted the Club itself to operate the gym, for the benefit of its members.

  5. Interslice adduced some evidence at trial tending to diminish the relationship between the operations of the Club and of the gym. In particular, the Club’s Chief Executive Officer sought to give evidence that the purpose of cl 10.4 of the 2014 lease to Interslice “was not to create an intermingling or an interconnection between the two businesses (the Club and the Gym)”, but that evidence was (rightly) admitted only as a submission.

  6. It is not necessary to make any findings on the exiguous evidence as to the terms governing any occupancy of the lower ground floor prior to 2014. Irrespective of the evidence referred to above, I would conclude that at all times most gym users were parking on the Club’s property. Most gym users at this site, which is in a residential area, not well served by public transport, would arrive by car. Where would they park if they were not members of the registered club and thereby entitled to use the 67 parking spaces on the club’s land to which an additional 6 were added as a condition of the consent to operate a gym? It would be impracticable to conduct a gym of the scale contemplated by the consent on the lower ground floor of the premises unless users of that gym also had access to the carparking on other land owned by the Club. There is no suggestion in the dealings between the Club and the Council, or in the assessment of the development application, that anyone took any other view, and that was the reason for the conditions concerning car parking in the consent which ultimately issued, in accordance with the assessment of the incremental effect of the gym upon the Club’s carpark in the Lyle Marshall report. And indeed, one of the attractions of the premises to Mr Robinson, who at the time was one of Interslice’s directors, was the free parking.

The use as a gym was not separate and independent

  1. The position resembles what was said by Sackville AJA writing for this Court in Bardsley-Smith v Penrith City Council at [91], referring to the use of premises as an “ePharmacy” which was impossible in the absence of a physical pharmacy, because of a legal obligation to supply items on the pharmaceutical benefits schedule:

Use of the Premises as a retail pharmacy, limited in this way, is therefore essential if the Premises are to be used as an ePharmacy. In other words, it is impossible to conduct an ePharmacy lawfully unless there is also a retail pharmacy on the Premises supplying members of the public with PBS items. This is a very clear case of purposes being “inextricably bound up” with each other and incapable of severance: Macquarie International Health Clinic v University of Sydney at 223 per Stein JA (with whom Mason P and Meagher JA agreed).

  1. The various considerations summarised above lead to the conclusion that the use of the lower ground floor for the purpose of a gym was also “inextricably bound up” with the use of the rest of the land as a registered club. The latter use is inseverable from the former. To summarise, the text of the consent reflects the refurbishment of the lower ground floor being included within the club. Other contemporaneous documents bearing upon what was authorised, notably the statement of environmental effects and the parking study which was incorporated into the consent, demonstrate that the authorised use would involve most users of the gym using the Club’s car park. While I would accept Interslice’s submission that the approved construction was designed to permit direct access between the lower ground floor and the car park without going through the licensed area of the registered club, the same evidence compels the conclusion that the gym was authorised to operate in conjunction with the Club’s car park. Far from the two uses being separate and independent, they were inseparable. The use of the lower ground floor as a gym did not survive independently of the use of the rest of the land for the purposes of a registered club.

  2. For those reasons, which supplement those given by McHugh JA, I agree that grounds 1, 2 and 2A fail.

Remaining grounds and costs

  1. The foregoing makes it unnecessary for me to express a view on a point which in any event was not argued in this Court. The point concerns whether regard may be had to the 2014 lease, and in particular the covenant requiring all gym users to be members of the club, for the purpose of characterising the use which was preserved by s 107 after 5 March 2015. The definition of “existing use” in s 106 is far from free from difficulty (see AMT Planning Consultants Pty Ltd t/as Coastplan Consulting v Central Coast Council [2018] NSWCA 289 at [23]-[29]) and in its application to the present facts, it is not even completely clear whether one has regard to the use of the lower ground floor “for a lawful purpose immediately before the coming into force” of the 2015 LEP within paragraph (a), or the use which was carried out “within one year after the date on which [the 2015 LEP] commenced” within paragraphs (b)(ii) of the definition, or both limbs (a point left open in AMT at [26]). But all limbs of the definition direct attention to the use in March 2015, at which point all gym users were required to be members of the Club. That tends to confirm the conclusion reached on other grounds, that the use of the lower ground floor as a gym cannot be severed from the use of the rest of the land as a registered club.

  2. That said, none of this was argued. Had it been dispositive, I would have invited further submissions from the parties. There is no point in taking that course in circumstances where nothing turns on it. It is sufficient to note that Interslice’s position concerning its entitlement to operate a gym is not improved if regard may be had to the terms of its lease.

  3. Grounds 3 and 4 challenge some of the findings of the primary judge concerning breach and repudiation of “the equitable lease”. Interslice validly exercised its right to an option but never received a registrable lease from CCA, and the parties proceeded on the basis that there was an “equitable lease”. There are, as McHugh JA points out, some conceptual difficulties in concluding that the obligation to provide a registrable lease was an incident of that equitable lease, as opposed to the legal lease whose term expired in 2014. The valid exercise of the option brought into existence an agreement to grant a new lease which was repudiated by CCA’s failure to supply a registrable lease. A party may repudiate an agreement to grant a new lease; see for example Young v Lamb [2001] NSWCA 225; 10 BPR 97,867 at [62]. However, prior to the acceptance of such repudiation, equity would regard the parties as between themselves as being subject to the same incidents as would have obtained had CCA issued a legal lease, and in an appropriate case a backdated order for specific performance could issue (as discussed in Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 252-256; [1989] HCA 63) so as to entitle Interslice to remedies at law. But it is unnecessary to analyse the complexities which attend to asking whether there is a repudiation of the “equitable lease” (which is really a shorthand for the proposition that equity would, by a decree for specific performance, treat the parties as if the promised legal lease had been granted) because on the view I take this appeal can be resolved on a more straightforward basis.

  4. I agree with McHugh JA that there was repudiation by CCA in failing to supply a registrable lease (which was the only part of Interslice’s case challenging the failure to find repudiation advanced on appeal).

  5. The primary judge reasoned at [111] that even if CCA did repudiate the equitable lease, Interslice was not entitled to terminate for repudiation, in circumstances where the use of the gym was not permitted under planning law and was therefore not ready and willing to perform the essential terms of the contract. I respectfully disagree with this. There was in 2019 and 2020 (just as there has been for the ensuing five years) a dispute between the parties as to whether the use of the lower ground floor as a gym survived the cessation of the use of the rest of the land as a registered club. At all times, Interslice maintained that it did, and while I have concluded that that is not the position in law, Interslice’s position is reasonably arguable. And what is more Interslice in fact continued to seek to operate the gym. I do not consider that Interslice’s reasonably arguable albeit erroneous claim that it was entitled to continue to operate a gym disentitled it from accepting CCA’s repudiation manifested by its failure to provide a registrable lease.

  6. There was a suggestion in CCA’s written submissions that Interslice’s continued operation of the gym after the Club had ceased to operate amounted, over time, to the breach of an intermediate term. This submission was made in the alternative to its primary position that the obligation to conduct a gym was a condition. This requires a notice of contention, and although one was belatedly supplied by CCA, it did not extend to that point. But in any event, the reasoning in the previous two paragraphs demonstrates that that submission does not disentitle Interslice from accepting CCA’s repudiation.

  7. But it is one thing to accept a repudiation, and another thing to establish compensable loss. I agree with McHugh JA’s reasons in relation to ground 5: in substance that in light of CCA’s intention to terminate the lease for Interslice’s failure to have planning approval and in the absence of a case that Interslice would have sought planning approval, no claim for substantial damages is available. Ground 6 was abandoned.

  8. Finally, I agree with the order proposed by McHugh JA that there be no order as to the costs of the appeal. Rather more than half of the hearing time was occupied by a motion to adduce further evidence, to which CCA’s opposition was unsuccessful. It was quite plain that much of the additional evidence should have been supplied at trial in answer to Interslice’s subpoena and repeated requests, as well as being credible and probative; cf Akins v National Australia Bank (1994) 34 NSWLR 155 at 160. And as McHugh JA explains, CCA repudiated its obligations to Interslice. This is an appropriate case to depart from the usual order that costs follow the event. Taking a broadbrush approach, the points on which CCA failed warrant an order that there be no order as to the costs of the appeal, with the intent that the parties bear their own costs.

  9. McHUGH JA: At the risk of some oversimplification, the main issues in this appeal are whether the primary judge erred (1) in construing a development consent, (2) in failing to find that the respondent repudiated a lease, and (3) in failing to award the appellant substantial damages. The second error is made out; the first and third are not. The appellant’s success on the second issue has no substantial effect on the economic outcome for the parties, save with respect to costs.

The parties

  1. The appellant in these proceedings (Interslice or the Tenant) operated a gym under the name Move Fitness Leisure Centre, which was located on the lower ground floor of a building on Hector Street, Bass Hill (the Premises). That building was situated on the land comprised in folio identifier 101/1053893 (the Land).

  2. The Tenant had occupied the Premises pursuant to a registered lease for a term of five years commencing on 16 October 2014 (the Original Lease), which contained an option for a new lease for a further term of five years. It was not in dispute that the Tenant exercised this option on 6 April 2019 and that the new lease was to commence on 16 October 2019.

  3. When the Original Lease was entered, the Land was owned by the City of Bankstown R & SL Community Club Ltd (the RSL Club). On 13 September 2019, the RSL Club sold the Land to the respondent, CCA Investments – Bass Hill Pty Ltd (the Landlord). It is not disputed that the Landlord never provided a new lease in registrable form to the Tenant. Nevertheless, the Tenant continued in occupation of the Premises until 28 April 2020, pursuant to what the parties agreed was an equitable lease (the terms of which are addressed below).

  4. By early 2020, the relationship between the Tenant and its new landlord had broken down. The Landlord claimed that the Tenant lacked planning consent to operate a gym, and eventually asserted that the Tenant was for that reason in breach of an express term of the equitable lease (cl 10.1(a)(ii)). Ultimately, each claimed that the other had repudiated either or both of the Original Lease and the equitable lease, and that the innocent party had accepted the repudiation and terminated.

  5. The Tenant commenced proceedings against the Landlord, seeking the return of a bond of $30,000 and damages. The Landlord cross-claimed, seeking arrears of rent, outgoings and other monies and damages. The second cross-defendant, Ms Danka Bakic, was the sole director of the Tenant. The third cross-defendant, Mr David Robinson, ran the day-to-day operations of the Tenant. The second and third cross-defendants were guarantors under the Original Lease.

  6. The primary judge determined that the Tenant was in breach of cl 10.1(a)(ii); that the Tenant had repudiated the equitable lease; that the Landlord had validly terminated it; that the Tenant was entitled to the return of the bond with interest; and that the Landlord was entitled to judgment against the Tenant on the cross-claim for nominal damages of $10.

The planning consent issue: Grounds 1, 2, 2A and 3

  1. The primary judge treated the planning consent issue as central to the questions concerning repudiation. I respectfully take a different view, in that I consider that the Landlord repudiated and the Tenant validly accepted the repudiation, notwithstanding that the Tenant lacked planning consent to carry out the permitted use under the lease. But the question whether the applicable planning regime permitted the appellant to operate a gym within a building that no longer operated as a registered club is important at several points in the analysis, and ultimately dispositive of the Tenant’s claim for substantial damages.

The planning consent issues before the primary judge

  1. It was not in dispute that cl 10.1(a)(ii) of the Original Lease (and also of the equitable lease) imposed an obligation on the Tenant to obtain, keep current and comply with all consents, approvals and licences from all relevant authorities necessary or incidental to the use of the Premises for the Permitted Use. The Permitted Use was defined in Item 6 of Annexure A to the Original Lease as “Health and fitness centre (including crèche)”.

  2. It was common ground that at all relevant times under the zoning of the Land, the use of the Land as a gym (or, for that matter, as a registered club) was not permitted without planning consent or pursuant to provisions of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act) concerning the continuance of uses. It was also not disputed that if the Tenant was operating the gym in breach of planning legislation following closure of the RSL Club, the Tenant would be in breach of cl 10.1(a)(ii).

  3. The primary judge found as follows at J[8]-[12], which findings are not contested.

“The original proprietor of the Land was the RSL Club. In or around 2006, the RSL Club sought to refurbish the building on the Land, and in July 2006, submitted to Bankstown City Council (the Council) a development application, which was given the reference 755/2006 (DA), along with a statement of environmental effects (SEE).

On 10 November 2006, the Council issued a development consent in respect of the DA (Consent), which permitted the development of the Land for the following purpose (subject to the conditions and requirements set out therein):

Refurbishment to Existing Bass Hill RSL Club Including Internal Alterations and Construction of Health Club, Children’s Play Area and Rear External Terrace.

Condition 2 in the Consent was that ‘the development shall take place in accordance with [the DA], submitted by Paynter Dixon Constructions Pty Ltd, accompanied by Drawing No. A01 and CC02 (Issue B) prepared by Paynter Dixon, dated 10 July 2006 and Drawing No. 1175-06 prepared by Lyle Marshall and Associates Pty Ltd dated September 2006 and affixed with Council’s approval stamp dated 10 November 2006, except where otherwise altered by the specific amendments listed here and/or except where amended by the conditions contained in this approval’.

At the time of the Consent, the Land was zoned as ‘2(a) — Residential A’ under the Bankstown Local Environmental Plan 2001 (NSW) (LEP 2001). It is not in dispute that cl 11(1) of LEP 2001 prohibited the operation of a registered club or health club/gym on the Land. However, as the RSL Club had been operating as a registered club for a period commencing prior to the introduction of LEP 2001, it was permitted to continue its operation as a registered club under the existing use provisions of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act) (then s 109).

Once the work under the Consent was completed, a series of gyms operated from the Premises prior to the grant of the Lease, including the Move Fitness Leisure Centre Business conducted on the Premises by Harry Cory Pty Ltd which [the Tenant] purchased from that company on 19 September 2014.”

  1. The Tenant submitted to the primary judge that it was permitted to operate a gym from the Premises under the existing use provisions of the EPA Act, in particular ss 4.66(1) and 4.65, which relevantly provide as follows:

4.65 Definition of “existing use”

In this Division, existing use means—

(a)   the use of a building, work or land for a lawful purpose immediately before the coming into force of an environmental planning instrument which would, but for this Division, have the effect of prohibiting that use, and

(b)   the use of a building, work or land—

(i) for which development consent was granted before the commencement of a provision of an environmental planning instrument having the effect of prohibiting the use, and

(ii)    that has been carried out, within one year after the date on which that provision commenced, in accordance with the terms of the consent and to such an extent as to ensure (apart from that provision) that the development consent would not lapse.

4.66 Continuance of and limitations on existing use

(1)   Except where expressly provided in this Act, nothing in this Act or an environmental planning instrument prevents the continuance of an existing use.

…

  1. The Tenant submitted to the primary judge that the use of the Premises as a gym was consented to by the Council pursuant to the Consent, and therefore constituted a lawful existing use within the scope of the EPA Act. The Landlord disputed that proposition.

  2. The primary judge said that the nature of the use of the Land approved by the Consent turned on the proper construction of the Consent. His Honour framed the issue as follows: “The question that arises is whether, on the proper construction of the Consent, the development which was approved was for a use of the Land for a health club as part of the operation of the RSL Club, or rather what was approved was a refurbishment of the RSL Club and a separate and independent use of the Premises for a health club”: J[82], emphasis supplied.

  3. His Honour quoted the summary of principles relating to the construction of development consents given by Payne JA in Bunderra Holdings Pty Ltd v Pasminco Cockle Creek Smelter Pty Ltd (2017) 96 NSWLR 434; [2017] NSWCA 263 at [158], which was not disputed in this Court.

“(1)   The nature and extent of the approved development must be determined by construing the document of approval, including any plans or other documents which it incorporates, aided only by that evidence admissible in relation to construction which establishes, or helps to establish, the true meaning of the document as the unilateral act of the relevant authority, not the result of a bilateral transaction between the applicant and the Council. Thus evidence of the nature of the site would always be admissible for this purpose, as would be, in appropriate cases, evidence as to the meaning of the marks on plans, or indeed, the meaning of the absence of particular marks: Parramatta City Council v Shell Co of Australia Ltd [1972] 2 NSWLR 632 at 637 (Hope JA).

(2)   A development consent is to be construed according to its terms, having regard to its enduring nature. A development consent has an enduring nature because it is not personal to the applicant but is a public document operating in rem for the benefit of third parties such as subsequent owners, occupiers and security holders, and in some respects is equivalent to a document of title: House of Peace Pty Ltd v Bankstown City Council (2000) 48 NSWLR 498; [2000] NSWCA 44 at [23]; Winn v Director-General of National Parks and Wildlife (2001) 130 LGERA 508; [2001] NSWCA 17 at [4]: The enduring nature of a development consent encourages a fair but liberal reading of the rights it confers upon a landowner who may spend considerable money acting upon it and who is likely to wish to sell the land sooner or later: House of Peace at [41].

(3)   A development consent is to be construed not as a document drafted with legal expertise, but to achieve practical results: Westfield Management Ltd v Perpetual Trustee Company Ltd [2006] NSWCA 245 at [36]; Baulkham Hills Shire Council v Ko-veda Holiday Park Estate Ltd (2009) 167 LGERA 395; [2009] NSWCA 160 at [105].

(4)   As a general rule, a development consent, being a public document operating in rem for the benefit of third parties, should be construed without reference to extrinsic evidence other than to identify a thing or place referred to in it. That extrinsic evidence is not led to vary the consent but to identify a thing or place referred to in it. Evidence as to the nature or physical features of the land may also be admissible for that purpose, at least those features observable by a third party at the time of the consent: Allandale Blue Metal Pty Ltd v Roads and Maritime Services (2013) 195 LGERA 182; [2013] NSWCA 103 at [44]; Shell Co of Australia at 637.”

  1. As to “extrinsic evidence”, that summary may require some refinement in light of the analysis of Basten JA (Gleeson JA agreeing, see also per Preston CJ of LEC at [265]) in Hunter Industrial Rental Equipment Pty Ltd v Dungog Shire Council (2019) 101 NSWLR 1; [2019] NSWCA 147 at [46]-[80]. However, Basten JA’s reasons and the conclusion stated at [80] are consistent with the common ground in this Court that it was appropriate to construe the Consent having regard to the development application and the Statement of Environmental Effects (SEE).

  2. The Tenant argued that on its proper construction, when considered in light of the development application and the SEE, the Consent contained separate consents for the refurbishment of the RSL Club and the construction and operation of the gym. The primary judge rejected that argument.

  3. The primary judge considered the terms of the Consent itself, the development application and drawings submitted with it, the SEE and the terms of the Bankstown Local Environmental Plan 2015 (NSW) (LEP 2015) which was in place at the end of September 2019 and under which the Land was zoned Residential, Low Density R2. The Land Use Table in the LEP 2015 prohibited “Recreation facilities (indoor)” (which was defined to include a gymnasium) and “Registered club[s]” (defined as a club that holds a club licence under the Liquor Act 2007 (NSW)). His Honour then turned to the provisions of the EPA Act applicable when the LEP 2015 was gazetted on 5 March 2015 (including ss 106, 107 and 109), before concluding at J[93] and [94]:

“Sections 107 and 109 of the EPA Act did not apply in the present case because, by early 2019, the Land had ceased to be used as an RSL Club, and certainly that use was abandoned when [the Landlord] purchased the Land. Thus, the existing use (being the use for which approval was given under the Consent) had by then been abandoned as the RSL Club had closed. As Mr Turrisi [the town planning expert called by the Landlord] confirmed, the fact that the gym had been operating prior to the LEP 2015 does not mean it could continue to do so afterwards as an existing use. The only lawful use prior to the LEP 2015 was to operate the gym as part of the RSL Club. Consequently, from at the latest, 13 September 2019, the use of the Premises for a gym was not permitted, and in breach of s 76B of the EPA Act (now s 4.3 of the EPA Act).

For these reasons [the Tenant] was in breach of cl 10.1(a)(ii) of the Equitable Lease from the time of its commencement.”

The planning consent issues in this Court

  1. On appeal, the Tenant was granted leave to adduce documentary material that had not been before the primary judge, which was (belatedly) produced by the Council pursuant to a subpoena, after the hearing at first instance.

  2. The planning consent issues arise as follows on the amended notice of appeal.

  3. First, by Ground 1:

“The trial judge erred in his construction of the development consent by finding that the use of the premises was a conjunctive use dependent on the club use such that once the club closed the gym could no longer operate (Judgment at [85]-[89]). Rather he ought to have found that the use of part of the premises as a gym was a separate and independent use.”

  1. Secondly, by Ground 2:

“The trial judge erred in finding that the use of the gym was not an existing use protected by ss 4.65-4.70 of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act) (Judgment at [91]-[93]).”

  1. Thirdly, by Ground 2A:

“The trial judge erred in his finding that the existing use was abandoned when the [Landlord] purchased the land and the RSL closed (Judgment at [93]).”

Ground 1: construction of the 2006 Consent

  1. As to Ground 1, which was the parties’ focus on the appeal, the central question remains, as the primary judge identified, whether the approval granted in 2006 was relevantly for “use of the Land for a health club as part of the operation of the RSL Club, or rather … was a refurbishment of the RSL Club and a separate and independent use of the Premises for a health club”.

  2. The context in which the Consent was granted is significant. As the Consent stated, under LEP 2001, the Land was zoned “2(a) – Residential A”. It was common ground before the primary judge that pursuant to cl 11 of the LEP 2001, in land zoned 2(a) development for the purpose of “Registered clubs” and “Recreation facilities” (which included a gym) was expressly “prohibited”. However, the “prohibition” in cl 11(2) was relevantly subject to two qualifications.

  3. First, cl 11(2) was expressly made subject to cl 12, which conferred a discretion on the Council to grant consent for development that was “prohibited” under cl 11 where it was satisfied that the proposed development met the requirements in cl 12(2). Clause 12(2) provided as follows.

“(2)    The consent authority may grant consent pursuant to this clause only where it is satisfied that the proposed development:

(a)   is of a nature (whether by reason of its design, scale, manner of operation or otherwise) that would, in the absence of this clause, justify an amendment to this plan in order to permit the particular development, and

(b)    is not inconsistent with the objectives of the zone in which the development site is situated, and

(c)    is not inconsistent with the provisions of any other environmental planning instrument, and

(d)    will not have an adverse effect on other land in the vicinity.”

  1. The Tenant submits, it appears correctly, that cl 12 was the source of the power the Council exercised to consent to the development in 2006.

  2. The second relevant qualification to the “prohibition” in cl 11(2) is that, since the RSL Club had been lawfully operating a club registered under the Registered Clubs Act 1976 (NSW) on the Land for many years, it was entitled under the EPA Act to continue that use. The Tenant submitted that, as the relevant use was permissible with consent (i.e., pursuant to cl 12), any rights to continue operation of the club arose under the former s 109 of the EPA Act. The primary judge stated the same conclusion at J[11]. Thus, at the time the Consent was granted in 2006, the RSL Club was entitled (notwithstanding the “prohibition” in cl 11(2)) to use the Land for the purpose of a registered club.

  3. That circumstance is significant in construing the Consent, which relevantly stated:

“Bankstown City Council hereby Consents to the above described land being developed for the following purpose, …

Description of Development:   Refurbishment to Existing Bass Hill RSL Club Including Internal Alterations and Construction of Health Club, Children’s Play Area and Rear External Terrace.”

(Emphasis supplied.)

  1. Contrary to the Tenant’s submission, the words “to Existing Bass Hill RSL Club” should not be understood as merely referring to a physical building which was to be refurbished. Given that the Land was identified by reference to its street address and a Lot in a deposited plan, and given that the refurbishment was identified in drawings submitted with the development application, mere reference to the physical building would have been superfluous. Instead, the reference to the Existing Bass Hill RSL Club makes clear that the Consent was to the development of the Land for a “purpose”, namely, the (continued) use of the Land, once refurbished, as a registered club, “[i]ncluding” various matters. One contextual reason for construing the Consent, made in the exercise of the power in cl 12, at that level of specificity is that cl 11 itself identified the uses which it “prohibited” at that level – in particular, “Registered clubs” were expressly prohibited.

  2. As Leeming JA explains, the development consent extended to a change in use of the lower ground floor to a gym. But that fact does not, without more, answer the question whether the Consent to the gym use was only as part of, or dependent on, the use as a registered club, as opposed to a separate and independent use of the Premises. It is entirely plausible that the Council would not have exercised its discretionary cl 12 power to consent to the construction of a gym in an area zoned 2(a) – Residential A, except as part of the amenity to be provided to members and guests of the “existing” registered club to which the Consent referred. In circumstances where (despite the express “prohibition” on “Registered clubs” in cl 11) a registered club was already operating lawfully pursuant to rights conferred by the EPA Act, and serving the purpose of providing amenity to its members and guests, it is understandable that the Council would take the view that it was appropriate to extend the amenity (in the form of a gym) provided to the registered club’s members and guests, particularly if the Council was satisfied that that would not have significant additional adverse impacts on the surrounding area (as to which, see the SEE below). That would be very different from consenting to the use of the Land as a gym as a separate and independent use from that as a registered club. Yet that would be the effect of the Tenant’s construction — to interpret the Consent as permitting the use of the Land as a gym even on the basis that the registered club packed up and left.

  3. The word “[i]ncluding” in the Consent should be understood against that background. Bearing in mind that a development consent is to be construed not as a document drafted with legal expertise, but to achieve practical results, as a matter of ordinary language the word “including” conveys that consent for the use of the Land for the purpose of a health club was granted only as part of the use of the Land as a registered club. The same is true of the consent to use the Land for the purposes of a “Children’s Play Area and Rear External Terrace”, both of which also follow the word “[i]ncluding”. Those areas were undoubtedly approved for use only as part of a registered club. It would be highly surprising if the Consent were to be interpreted as approving a separate and independent use of the Land as a children’s play area, such that that use could continue after any use of the Land as a registered club was abandoned. There is no reason to construe the Consent as putting the gym in a different category.

  4. That the Consent should be construed in the way in which the primary judge did is consistent with the SEE. The SEE included the following statements.

“In order to address current trends and legislative requirements the Club must modify the existing floor areas. The Club now must consider other more suitable uses for the existing licensed area such as the inclusion of a kids play area. The change in strategy is partly prompted by the proposed banning of smoking within licensed clubs in 2007.

The existing lower level is proposed to be converted to a health club which is to serve members and guests. There is no increase in the gross floor area (GFA) of the building and in fact the licensed area is reduced.

The existing use is defined as a registered club under the Registered Clubs Act 1976. The terrace areas will be licensed and smokers or non[-]smokers will be able to access the external areas in the same way existing external areas are used by patrons. There are no bars proposed within these areas and alcohol can be consumed in all licensed areas with or without food.

…

The subject site is zoned residential 2(a) and as such a registered club is not permissible in the zone. The application is made pursuant to the discretion power afforded by Cl. 12 of the Bankstown Local Environmental Plan 2001 (BLEP 2001). The assessment of BLEP 2001 is prescribed by Section 79C of the Environmental Planning and Assessment Act 1979 (the “Act”).

…

Plates 4 and 5 show the existing car park located to the rear of the Club which provides a visual and acoustic buffer to the surrounding residential developments to the north, west and south. The existing floor area does not increase and there are no impacts on the current parking demands. Part of the licensed area is reduced (due to inclusion of kids play area). No spaces are lost or nor are there any changes to the parking or access arrangements. The health club simply replaces [the] licensed area.

…

The proposed internal works, health club and external terraces preserve the existing amenity and character of the area and are acceptable in the circumstances of the site. The modifications will allow the Club to continue its employment levels and grow in the future to achieve the objectives of the BLEP 2001.

…

The scale and manner of the Club operation is such that the adjoining residential amenity is preserved to reasonable levels. The site provides the required car parking and in effect the licensed area is reduced with the inclusion of a kids play area. The existing Club use is not antipathetic to the residential objectives and appears to have operated with little impact on the adjoining properties in the past.

…

Objective 1(e) [“to allow for some non-residential use that would not adversely affect the living environment or amenity of the area”] is the most relevant to the assessment and the application of clause 12. The objectives clearly acknowledge that some non residential uses may co-exist with residential development. It is our submission that the Club will continue to operate in an orderly manner and the proposed alterations will not cause adverse impacts.

…

The additional 10 patrons to the front terrace is not a significant issue given that the Club have demonstrated an ability to manage noise and patrons in this area. Club staff will manage patrons in the same current manner and will control unruly behaviour. The Club have strict sign in controls and rules of conduct which are generally more stringent than other licensed premises such as nightclubs and pubs. Historically Club patrons are better behaved than patrons of other licensed premises.

…

The relevant issues have been addressed with regard to the public interest as reflected in the relevant planning policies and codes. The development is unlikely to result in any adverse impact to the public interest in the circumstance[s] of the case, particularly noting the minimal impact of the works.”

(Emphasis added.)

  1. Nothing in the SEE suggests that approval was sought or granted for the use of a gym as a separate and independent use from that of a registered club. To the contrary, all aspects of the development were put forward in the SEE as being part of, and for the purpose of, the registered club use. In particular, it was said of the proposed “health club” that it “is to serve members and guests”. Plainly, that was a reference to members and guests of the existing registered club, that is, “patrons”. The statement that the “health club simply replaces [the] licensed area” again shows that the gym use, like the licensed area that it replaced, was to be part of the registered club use.

  2. The Tenant submits that no condition of consent required that the gym be used only by the members of the club, or during the hours of the club’s operation, or that it be in any other way physically or operationally dependent on the club. So much may be accepted. But those matters do not compel the conclusion that, contrary to the ordinary meaning of the language used, the Consent permitted the use of part of the Land as a gym separately and independently from the use as a registered club.

  3. The Tenant submits that it is “evident that the description of the development, liberally construed, together with the plans, authorised the ‘new gym’ not as a use for a club but a separate self-contained use within the RSL Club building.” The various matters to which the Tenant points, largely by reference to the plans, the construction certificate and related documents, may not be inconsistent with that conclusion, but they do not compel it as a matter of construction of the Consent. On the whole, they are equally consistent with the conclusion that the gym use was to be as an integral part of the registered club use.

  1. The object of any award of damages consequent upon termination of the agreement for lease contained within the Original Lease must be to put the Tenant in the same situation as if the agreement had been performed: Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 80; [1991] HCA 54 per Mason CJ and Dawson J; Foran v Wight at 430 per Brennan J (referring to “an estimate of the benefit to which [the plaintiff] would have been entitled”). If the Landlord had performed its obligation, the Tenant would have had a registered lease with a term of five years. The Tenant would also have been subject to the burden of the covenants contained in the new lease, including the covenants as to payment of rent and carrying out only the Permitted Use. That was the “expectation … created by the contract”, i.e., the agreement for lease contained within the Original Lease.

  2. Although the registered lease would have given the Tenant the legal right to occupy the Premises and (as between Landlord and Tenant) to carry out the Permitted Use there, that was as far as the legal expectation created by the agreement for lease itself went. Neither the agreement for lease, nor the new lease itself, created an expectation that the Tenant would have a business, or that any business would be lawful, or that it would be a profitable business.

  3. The legal expectation to which the Tenant would have been entitled had the Landlord performed its contractual obligation was no more than that the Tenant would have the opportunity to continue to occupy the Premises for the purpose of carrying out the Permitted Use, subject to the terms of the new registered lease. That legal expectation might nevertheless have amounted to a valuable commercial opportunity, particularly given that the Tenant was already in occupation and conducting its business from the Premises.

  4. The commercial opportunity was to be valued, and any damages for breach of contract assessed, in accordance with the principles as to causation and damage discussed in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 355; [1994] HCA 4 per Mason CJ, Dawson, Toohey and Gaudron JJ:

“… damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s. 52(1) [of the Trade Practices Act 1974 (Cth)], should be ascertained by reference to the court’s assessment of the prospects of success of that opportunity had it been pursued. …

On the other hand, the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities.”

(Emphasis in original.)

The primary judge’s decision on causation and damages

  1. Under the heading, “Issue 4: What is the amount of [the Tenant’s] damages”, the primary judge said at J[118]: “In light of my conclusions on the first two issues, this issue does not arise. However, in case the matter goes further, I will deal with it.” The reference to “the first two issues” appears to be to J[60], where his Honour set out a list of issues starting with (1) “Whether [the Tenant] was in breach of cl 10.1(a)(ii) of the Equitable Lease”; and (2) “Did [the Landlord] repudiate the Equitable Lease by repeatedly refusing to issue a lease in registrable form to [the Tenant] from 15 October 2019?”

  2. The primary judge had determined both of those issues adversely to the Tenant. The alternative hypothesis upon which his Honour proceeded when considering damages at J[119]ff appears to have been that his Honour was wrong on both counts.

  3. It might be noted, however, that the conclusions reached above are that his Honour was (1) correct that the Tenant was in breach of cl 10.1(a)(ii), but (2) in error in concluding that the Landlord had not repudiated. What his Honour said about causation and damages should be approached with that in mind.

Causation

  1. The primary judge found at J[120] that the Landlord’s:

“failure to provide a registrable lease was not the cause of [the Tenant’s] business ceasing to operate from the Premises. Both Mr Assaf’s evidence (eg. T 314.13–314.14) and contemporaneous documents (eg. Mr Assaf’s email of 14 January 2020) indicate that [the Landlord] wanted [the Tenant] to continue in occupation as tenant. The cause of the loss was the inability of CCA to seek or obtain the necessary planning consent for its continued occupation of the Premises as a gym.”

(The word “CCA” in the last sentence should be read as a reference to the Tenant.)

  1. The Landlord also relied on Ground 1 in its notice of contention, which is to the effect that the primary judge’s finding that causation was not made out should be upheld on the additional basis “that the Appellant did not establish that the First Respondent’s failure to issue a lease in registrable form was a cause of any loss to the Appellant, given that the Appellant was entitled to occupy the Premises pursuant to an Equitable Lease which was on the same terms as the terms which a lease in registrable form would have had.”

  2. The proposition that the failure to provide a registrable lease was not the cause of the Tenant’s ceasing to operate from the Premises should be rejected. For the purposes of the law of contract, it is the defendant’s act of repudiation that is taken to cause the loss of the bargain, not the plaintiff’s act of termination upon acceptance of the repudiation. Once the Tenant terminated the agreement for lease contained within the Original Lease, as it was entitled to do, there could be no equitable lease, and the Tenant was no longer entitled to operate from the Premises.

  3. As already noted, in early April 2020 the Tenant was in occupation and conducting its business. If the Tenant had established that the opportunity to continue to do so had “some value” (a proposition rejected below), the Tenant would have established that the Landlord’s repudiation, which deprived the Tenant of the opportunity to operate, caused the Tenant’s loss. To that extent, I disagree with his Honour’s conclusion as to causation at J[120].

  4. It might be noted that the proposition in the last sentence of J[120] quoted above (as to the lack of planning consent) is in tension with the alternative hypothesis on which the analysis commencing at J[118] was otherwise to proceed, namely, that his Honour was wrong on that issue. However, as will next be seen, the fact that the Tenant lacked planning consent to operate a gym is highly material to valuing the Tenant’s lost opportunity to occupy the Premises and carry out the Permitted Use.

Damages: the value of the lost opportunity

  1. His Honour found that the Tenant had not established an entitlement to damages (J[120]), for two reasons. First, the issue of causation referred to above. Secondly, his Honour rejected the evidence of the accounting expert called by the Tenant, Mr Calvetti, that the Tenant’s loss of pre-tax profits over the period 1 April 2020 to 30 September 2024 was $1,176,803: J[121]. Instead, his Honour preferred the evidence of Mr Ferrier, the accounting expert called by the Landlord, that the loss of profits over that period was $110,749, which would be reduced to zero if, as his Honour found was likely, the Tenant was charged for its electricity supply: J[122]. Although not the subject of a separate ground of appeal, this latter finding was strongly contested in submissions.

  2. These reasons will return to the accounting evidence shortly.

  3. However, the fact that the Tenant was in breach of cl 10.1(a)(ii) is fatal to the Tenant’s claim for substantial damages. The counterfactual hypothesis on which the lost commercial opportunity is to be valued is that the Landlord had performed its contractual obligation by delivering a new lease in registrable form, which had been registered. The facts would not otherwise have been relevantly different as a result of the Landlord’s performing its contractual obligation. In particular, the new lease would have contained a cl 10.1(a)(ii) in the same terms as that in the equitable lease; the Tenant would have continued to lack planning consent to operate a gym; and accordingly the Tenant would have been in breach of the new lease.

  4. In that counterfactual situation, there is no reason to doubt that the Landlord would have issued substantially the same notice which it in fact issued on 11 March 2020 pursuant to s 129 of the Conveyancing Act. That notice gave the Tenant until 13 April 2020 to demonstrate to the Landlord’s reasonable satisfaction that the breach of cl 10.1(a)(ii) could be rectified, and, if so, a further reasonable period for the Tenant to rectify. The notice stated that the Landlord would otherwise terminate the lease. There is no substantial reason to doubt that by mid-April Mr Assaf would have caused the Landlord to terminate the lease if the Tenant failed to remedy its breach of cl 10.1(a)(ii). After all, that was exactly what the Landlord sought to do (although on a different ground) when it sent its notice dated 14 April 2020 purporting to accept what it alleged was a repudiation on the part of the Tenant (being the Tenant’s notice of termination dated 7 April 2020).

  5. I would disagree with the primary judge’s statement at J[120] that “[the Landlord] wanted [the Tenant] to continue in occupation as tenant” if it is understood as referring to the position as at April 2020. His Honour referred to “Mr Assaf’s evidence (eg. T 314.13–314.14)”. This appears to be a reference to lines 9-10 on that page, where Mr Assaf said, “I had a lease in place and I was going to get rent off the club - off the gym, and I was happy.” That evidence was not anchored as to time, but was given in the context of discussion of an email sent by Mr Frank Sartor (who was a consultant to the Landlord) to Mr Assaf on 10 October 2019: Tcpt, 10 August 2023, 312.17. The primary judge also referred at J[120] to Mr Assaf’s email of 14 January 2020. That was an email in which Mr Assaf said, “We can help resolve this with a planning proposal as added permitted use.” But reading the email as a whole, Mr Assaf was far from encouraging that outcome. He said that he had paid for the barrister Mr Staunton’s advice (which was extracted in the email) and advice from a planner; that Mr Assaf would have to invoice the Tenant for those costs; and that “Again you will need to pay for these costs” (i.e. of any new planning proposal). In any event, much happened between 14 January and mid-April.

  6. The question is then whether upon receipt of the Landlord’s notice, the Tenant would have attempted to remedy its breach of cl 10.1(a)(ii) and, if so, what its prospects of success would have been.

  7. There is no basis upon which to conclude that the Tenant would have attempted to obtain new planning consent, and the Tenant did not suggest otherwise. The Tenant’s consistent position, from 2020 up until and including the present appeal, has been that the Consent was sufficient to confer planning approval for the Tenant to conduct its gym business. Mr Robinson gave evidence that he had obtained advice about the scope of the Consent from Ms McCaffery, a town planner at the Council, on or around 13 December 2019. He gave evidence that two years later Ms McCaffery confirmed her advice (by telephone) on 11 February 2022. The effect of that evidence was that Ms McCaffery advised in December 2019 that the gym could keep operating without the need to apply for a new development consent. Under cross-examination, Mr Robinson gave evidence that he was “pretty sure” he had asked Ms McCaffery the specific relevant question namely, “Does the consent in 2006 allow us to operate a gym on the site, despite the fact that the RSL has closed?” (Tcpt, 8 August 2023, 140.28-31) Mr Robinson also gave evidence that it was most likely that he had sought legal advice about the issue. (Tcpt, 8 August 2023, 138.37)

  8. Given that that was the Tenant’s consistent position, in light of what in fact occurred it is improbable that in April 2020, the Tenant would have spent money to pursue obtaining a separate planning consent to permit it to conduct its business. It was not the Tenant’s case that it would have sought to do so. Its case was that it did not need to. And the probabilities are strongly against that possibility. On 22 March 2020, Mr Robinson of the Tenant sent an email to members of the Move Fitness gym, which included the following statement after referring to Covid-19:

“As per the NSW Government’s instructions Move Fitness will be temporarily closing from Wednesday 25th March. During this closure your Membership will be suspended and you will not be charged.”

(Bold in original.)

  1. As the primary judge found at J[121(3)], on the following day (23 March 2020) a public health order required the closure of gyms and fitness centres in New South Wales.

  2. There is also no basis upon which to conclude that, even if the Tenant had attempted to obtain planning approval, the Tenant would have been able to do so either at all, or within time so as to comply with the Landlord’s notice. It might be noted that the effect of the Land Use Table in the LEP 2015 was that in the R2 zone (subject to any existing use rights) use of the Land for a gymnasium was prohibited, rather than permitted only with consent.

  3. In the result, there is no basis upon which to conclude that the commercial opportunity which the Landlord’s repudiation denied to the Tenant had any value. Early April 2020 was the start of the Covid-19 pandemic, and the Move Fitness gym business was not charging its members. Although that position would have been temporary, there is no basis on which to conclude that there was any real prospect that the Tenant would have persuaded the Landlord that it would obtain a new planning consent (or that no further planning consent was required) before the expiry of the time stated in the Landlord’s notice dated 11 March 2020. And there is every reason to think that the Landlord would then have exercised its right to terminate any new registered lease.

  4. That being so, it is unnecessary to determine the issues about the accounting experts. However, as that evidence was the subject of detailed submissions, the following should be noted.

The Accounting evidence

  1. There is considerable force in the five criticisms the primary judge made of Mr Calvetti’s evidence at J[121], which the Tenant does not fully answer in this Court.

  1. First, the Tenant appears to accept the correctness of the primary judge’s criticism that Mr Calvetti’s estimate of revenue for FY 2020 was inconsistent with the BAS statements for that year. Nevertheless, as the Tenant points out, the BAS statements showed substantial revenue as at April 2020. And, to the extent that the Tenant relies, by way of explanation for the figures, on breaches by the Landlord of its covenant for quiet enjoyment, the submission gains some support in findings of the primary judge at J[117] that there had been disruptions to the Tenant’s business.

  2. Secondly, the Tenant attempts to explain the declining revenue in FY 2020, to which the primary judge referred, on the basis that the decline was due in part to a reorganisation of the business, and would be recouped in future years. The Tenant complains that this reason was not considered by the trial judge. This Court is not in a position to assess the probability that the recoupment would occur.

  3. Thirdly, the primary judge pointed out that the expert’s estimates for the revenue for the last quarter of FY 2020 and for FY 2021 and FY 2022 (for each of which the expert predicted increases in revenue) did not take into account the impact of the Covid-19 lockdown. As his Honour said, on 23 March 2020 a public health order required the closure of gyms and fitness centres in New South Wales. The Tenant complains that the primary judge did not consider evidence given by the gym manager of the steps that the Tenant would have taken to “pivot” to earn more revenue after the Premises were closed. Although his Honour did not expressly refer to the manager’s evidence, it is not clear that he failed to take it into account when stating that Mr Calvetti’s evidence “was not adequately explained or supported”. But on the assumption that the Tenant’s criticism was well founded, again this Court would not be in a position to address the evidence.

  4. Fourthly, the primary judge was critical of Mr Calvetti’s assumption that the wages cost of the business would drop on the basis that Mr Robinson and Ms Bakic would continue to work for the business but not draw a salary, contrary to the practice in previous years. The Tenant submits that there was evidence from one of the proprietors that that was what he would do and that there was no finding rejecting that evidence. Again, it is not clear that his Honour did not reject that evidence when finding that the assumption was “not plausible”. But, again, this Court is not in a position to assess the particular evidence.

  5. Fifthly, the primary judge criticised Mr Calvetti for failing to apply a discount for uncertainty and risk, particularly in light of the Covid-19 lockdown. To some extent this point overlaps with the third one. The Tenant’s answer, that the expert did so by reducing the assumed growth rate of the business, does not engage with the substance of the point.

  1. The Landlord also made a number of detailed submissions about those five points and advanced further discrete criticisms of Mr Calvetti’s evidence in accordance with Ground 2 of its notice of contention, to which the Tenant responded. This Court would not be in a position to resolve those disputes which depend, to some extent, on unresolved questions of primary fact.

  2. The Tenant is nevertheless correct in submitting that it does not necessarily follow from the primary judge’s criticisms of Mr Calvetti’s evidence (even before taking into account the Tenant’s partial answers to them) that that evidence should have been rejected in its entirety. The primary judge treated those matters as going to Mr Calvetti’s reliability generally, rather than giving rise to a need to make adjustments to his figures. It is not self-evident from the five matters to which his Honour referred that Mr Calvetti’s evidence was wholly unreliable.

  3. There is also force in the Tenant’s complaint that apart from describing Mr Ferrier’s approach as “more realistic”, his Honour gave no reasons for preferring his evidence, and that his Honour failed to resolve various disputes between the experts. The Tenant also made other submissions critical of the approach adopted by Mr Ferrier. The Landlord’s submission that J[122] “made it clear that the trial judge preferred Mr Ferrier’s evidence on all points of difference between the two accounting experts” is no answer to the Tenant’s complaint that the reasoning supporting that conclusion was not exposed.

  4. In the result, I consider that if it had been necessary to determine the issue, the basis upon which his Honour assessed the damages at zero (wholly rejecting Mr Calvetti’s evidence and wholly accepting that of Mr Ferrier, without resolving the specific differences between them or deciding disputed questions of primary facts), discloses error.

  5. However, even if the planning consent issue had been resolved in favour of the Tenant such that the lost opportunity might have had some value, this Court would not have been in a position to assess the damages itself. The Tenant submitted (by way of fall-back to its primary position discussed below) that it would be open to this Court to assess damages, “using FY 2019 (a non-COVID year) as a base year but applying a low revenue growth rate of 0.5% (to take into account the effects of COVID in 2020 and 2021)”. The Landlord submitted that this Court would not have a proper basis to assess the damages itself by picking and choosing parts of Mr Calvetti’s report. The Landlord’s submission should be accepted. In particular, there would not be a proper basis for the Court to engage in the exercise suggested by the Tenant.

  1. The Tenant’s primary position was that if it succeeded on the repudiation issue, the matter should be remitted for the assessment of damages. The Landlord submitted that there is no basis to remit the matter for a further assessment of damages; but that submission proceeded on the assumption that Mr Calvetti’s evidence was correctly rejected (i.e., in toto).

  2. In the result, were it not for the conclusion reached above that the Tenant failed to establish that the opportunity it lost had any value in circumstances where it lacked planning consent to carry out the Permitted Use, it would have been necessary to remit the question of damages to the primary judge. That is not to say that the outcome of that exercise would necessarily have been different. The assessment would have been on the basis of the evidence already led. The Landlord was right to submit that the Tenant should not be “entitled to have another go at preparing evidence as to loss because the evidence it did lead was flawed.”

Conclusion

Disposition of the Grounds of appeal and contention

  1. In the result, as to the notice of appeal, Grounds 1, 2, 2A and 3 (which concern the planning consent issue) are not made out. Ground 4 (repudiation) succeeds. Ground 5 (substantial damages) is not made out.

  2. It follows that (although none was sought by the Tenant) there should be a declaration that the Original Lease has been validly terminated by the Tenant. The Tenant is entitled to nominal damages of $10 on account of the Landlord’s repudiation of the Original Lease. The Tenant is also (as the primary judge found at J[142]) entitled to return of the bond plus interest. The order in that respect should not be disturbed. The Tenant’s amended statement of claim should otherwise be dismissed.

  3. As earlier noted, it follows from the success of Ground 4 in the notice of appeal that the Landlord’s cross-claim must be dismissed.

  4. As to the notice of contention, Ground 1 (causation) substantially fails. Ground 2 (rejection of Mr Calvetti’s evidence) has proven unnecessary to determine.

Costs

  1. As to costs, in a separate judgment the primary judge proceeded on the footing that the Tenant’s claim and the Landlord’s cross-claim were opposite sides of the same coin. The primary judge awarded the costs of the proceedings (on both the claim and the cross-claim) against the Tenant on the ground that the real issue in dispute was the question whether the Tenant’s termination of the lease was valid, and the Tenant failed on that issue. The premise of that order has been upset on appeal, and the discretion must be re-exercised.

  2. The Tenant failed both at first instance and in this Court on two issues which occupied much time and evidence: the planning consent issue and proof of substantial damages. However, the Tenant has succeeded on appeal on a third substantial issue, repudiation, and the appeal should be allowed to that extent. It is appropriate in the circumstances that each party bear its own costs in this Court.

  3. As to the costs at first instance, in the result the Tenant’s claim has succeeded (but only to the extent of nominal damages and return of its bond), and the Landlord’s cross-claim has wholly failed. The practical effect is that the Tenant has failed in the main object of its claim, obtaining substantial damages. That is in substance the “event” for present purposes. On the other hand, it is difficult to see why the Landlord should not pay the Tenant’s costs of the cross-claim, to the extent that they are separately identifiable.

  4. In the circumstances (1) each party should pay its own costs in this Court; (2) the Tenant should pay the Landlord’s costs of the proceedings on the statement of claim at first instance; and (3) the Landlord should pay the Tenant’s costs of the cross-claim at first instance. There is no occasion to make costs orders with respect to the second or third cross-defendants, who submitted in this Court.

Orders

  1. The Court should order:

  1. Appeal allowed in respect of Ground 4.

  2. Set aside:

  1. declaration 1 and orders 2(b) and 3 of the orders made on 8 May 2024 by Richmond J; and

  2. orders 1 and 2 of the orders made on 23 May 2024 by Richmond J.

  1. In lieu thereof:

  1. declare that the lease between the defendant as lessor and the plaintiff as lessee in respect of the premises comprised in part folio identifier 101/1053893 located at lower ground floor, 330 Hector Street, Bass Hill, New South Wales has been validly terminated by the plaintiff;

  2. order that judgment be entered for the plaintiff against the defendant on the amended statement of claim in the sum of $10;

  3. subject to any costs orders already made, order that the plaintiff pay the defendant’s costs of the proceedings on the plaintiff’s claim at first instance;

  4. subject to any costs orders already made, order that the defendant pay the plaintiff’s costs of the defendant’s cross-claim at first instance;

  5. otherwise dismiss the proceedings on the amended statement of claim;

  6. dismiss the cross-claim.

  1. The amended notice of appeal otherwise be dismissed.

  2. The notice of contention be dismissed.

  3. There be no order as to the costs of the proceedings in this Court.

**********

Decision last updated: 04 August 2025

Most Recent Citation
Cases Citing This Decision

1

OTR 208 PTY LTD and CITY OF VINCENT [2025] WASAT 117
Cases Cited

14

Statutory Material Cited

7

Bardsley-Smith v Penrith City Council [2013] NSWCA 200
Bardsley-Smith v Penrith City Council (No 2) [2013] NSWCA 284
Jojeni Investments Pty Ltd v Mosman Municipal Council [2015] NSWCA 147