Italia Ceramics International Super Pty Ltd v CM Corporation Pty Ltd

Italia Ceramics International Super Pty Ltd (appellants) and CM Corporation Pty Ltd (first respondent) were parties to a lease agreement. The dispute arose when the first respondent failed to pay rent for November and December 2015, following storm damage to the leased premises in September 2015 which was not repaired until December 2015. The appellants subsequently issued notices to remedy default and to re-enter, terminate, and demand, ultimately re-entering the premises and taking possession. The matter was heard by the Full Court of the Supreme Court of South Australia.

The central legal issues before the court were whether the first respondent was entitled to an abatement of rent due to the storm damage and subsequent unrepaired state of the premises, and consequently, whether its failure to pay rent for November and December 2015 constituted a fundamental breach of the lease agreement justifying termination. The court also considered the interpretation of the lease covenants in light of the damage and the landlord's obligations regarding repairs.

The court reasoned that the lease agreement did not contain an express covenant for abatement of rent in the event of damage to the premises. It further held that the common law right to abatement of rent, which arises where premises become uninhabitable or unfit for the purpose for which they were leased, was excluded by the express terms of the lease. The lease contained covenants regarding the landlord's obligation to repair and the tenant's obligation to pay rent, and the court found that the tenant's obligation to pay rent was not conditional upon the landlord's performance of its repair obligations. Therefore, the first respondent's failure to pay rent for November and December 2015 was a breach of a fundamental covenant, entitling the appellants to re-enter and terminate the lease.