Kelly v The Alternative Web Pty Ltd - [2010] SASC 4

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
KELLY & ANOR v THE ALTERNATIVE WEB PTY LTD
[2010] SASC 4
Judgment of The Honourable Justice Kourakis
20 January 2010
LANDLORD AND TENANT - LEASES AND TENANCY AGREEMENTS - CONSTRUCTION AND INTERPRETATION - SURROUNDING CIRCUMSTANCES
LANDLORD AND TENANT - LEASES AND TENANCY AGREEMENTS - SUBJECT MATTER OF LEASE - SUFFICIENCY OF DESCRIPTION
LANDLORD AND TENANT - TERMINATION OF THE TENANCY - GENERALLY
The defendant is the proprietor of land on part of which is a caravan park – the plaintiffs lease the portion of the land containing the caravan park – other parts of the land excluded from the lease so that the defendant might develop it as a villa complex – at the time the lease granted, parties also entered into a management agreement by which the plaintiffs would provide management services to the villa complex – villa complex development refused planning consent – parties dispute what parts of the land excluded from the lease – whether certain common areas of the land were excluded or whether the plaintiffs were granted exclusive occupation of those common areas – a term of the lease was that the plaintiffs not transfer the lease of the caravan park without defendant’s consent – whether agreement to sub-lease between the plaintiffs and a third party breached the lease – whether it follows that defendant’s Notice of Termination of the lease was effective – whether Notice of Termination ineffective for non-compliance with s 10 of the Landlord and Tenant Act 1936 – whether plaintiffs entitled to reimbursement for costs of repairing electricity and sewerage infrastructure of villa complex, for costs and expenses of maintenance of sewerage and effluent system and of ablution block of villa complex, and for expenses and work done in maintaining certain parts of villa complex land as a result of failure of villa complex development.
Held: Although common areas of the land excluded from the lease, plaintiffs were granted a licence to use those common areas – sub-lease agreement between plaintiffs and third party conditioned on the consent of the defendant – in any case, oral consent to the sub-lease agreement was given – therefore, defendant’s Notice of Termination of the lease ineffective – Notice of Termination also ineffective for failing to comply with s 10 of the Landlord and Tenant Act 1936 – pursuant to implied terms of lease and management agreement, plaintiffs entitled to be reimbursed for costs of repairing electricity and building infrastructure, but not costs of maintenance of sewerage and effluent system or ablution block – plaintiffs entitled to reimbursement for expenses and work done in maintaining parts of villa complex but only to the extent that work requested by the defendant with the promise of reimbursement.
Landlord and Tenant Act 1936 s 9, s 10, referred to.
Scala House and District Property Co Ltd v Forbes [1974] QB 575, considered.

KELLY & ANOR v THE ALTERNATIVE WEB PTY LTD
[2010] SASC 4
Civil
KOURAKIS J
Introduction

The parties in this matter are entangled in a multi-faceted dispute arising out of the operation of the Blanchetown Caravan Park. The defendant (The Alternative Web) is the proprietor of all of the land in Certificate of Title Register Book Volume 5891 Folio 829 which comprises two pieces of land, Piece 50 and Piece 51. The caravan park is situated on Piece 51. Piece 50 is used as a depository for grey water run-off from the effluent system servicing the caravan park. The sole director and shareholder of The Alternative Web is Lynece Schmidt, but at all material times her husband Anthony Schmidt acted on its behalf in its dealings with the plaintiffs, Mr and Mrs Kelly.
Mr and Mrs Kelly are the lessees of part of Piece 51 and carry on the caravan park business. I shall refer to the part of Piece 51 leased by them as the caravan park. The term of the lease extends from 1 July 2004 to 30 June 2103. Much of Piece 51 was excluded from the lease so that The Alternative Web might subdivide it and grant long term leases over small allotments to persons who would build or place holiday villas on them. I shall refer to that proposed development as the villa complex. At about the same time that the lease was granted, the parties entered into a management agreement by which Mr and Mrs Kelly agreed to provide management services to the villa complex. The villa complex development never eventuated for lack of planning consent and the financial rewards from that development, which the parties had anticipated, were never realised.
The parties dispute precisely which parts of Piece 51 were excluded from the lease. The primary consequence of this dispute, at least in the claims made in these proceedings, is to affect the proportion of rates and taxes payable by the plaintiffs. Both parties accept that the allotments on which the proposed holiday villas were to be constructed were excluded and that certain identified caravan park sites, several cabins, the kiosk and the manager’s residence were included. Paradoxically Mr and Mrs Kelly contend, notwithstanding the increased rate and tax liability they would thereby incur, that they were given a lease over, and thereby exclusive occupation of, what I will proleptically refer to as the common area of Piece 51. The common area includes the toilet and shower block, a shared laundry, roads and recreational areas. The Alternative Web contends that those facilities were to be shared by the caravan park residents and the residents of the villa complex and were therefore excluded from the lease. For the reasons appearing below, I find that the common areas were excluded from the lease but that the plaintiffs were granted a licence to use the common area for the purposes of the caravan park.
It was a term of the lease that Mr and Mrs Kelly not part with possession or transfer the lease of the caravan park without the consent of The Alternative Web. The Alternative Web alleges that in early January 2007 Mr and Mrs Kelly parted with possession of the caravan park to Fidge Barrett Pty Ltd (Fidge Barrett). I find that Mr and Mrs Kelly entered into an agreement to sub-lease the caravan park but that that agreement was conditioned on the consent of The Alternative Web. Accordingly Mr and Mrs Kelly did not part with possession of the caravan park. I also find that, to the extent that Fidge Barrett were granted any equitable interest in the caravan park, that equitable grant did not breach the applicable clause of the lease. Moreover, I find that Mr Schmidt orally consented to the proposed lease before Mr Kelly signed the agreement. Mr Schmidt gave that consent in circumstances which would preclude The Alternative Web from relying on the grant of the sub-lease as a ground for termination even if, contrary to my finding, Mr and Mrs Kelly had unconditionally parted with possession of the caravan park. My reasons for so finding appear below.
A Notice of Termination of the lease was served on Mr and Mrs Kelly by The Alternative Web on about 13 March 2007. The Notice alleged that the plaintiffs were in breach of the lease because they had parted with possession of the caravan park, failed to pay rent and had not taken out the stipulated insurance. It follows from my finding as to the conditional nature of the agreement with Fidge Barrett and Mr Schmidt’s assent to the proposed lease that the Notice of Termination was ineffective. The plaintiffs also contend that the Notice of Termination was ineffective for non-compliance with s 10 of the Landlord and Tenant Act 1936. I find that The Alternative Web failed to serve a notice on the plaintiffs specifying the breaches on which it relied before terminating the lease and that it was therefore precluded by s 10 of the Landlord and Tenant Act 1936 from terminating the lease and enforcing its claimed right of re-entry. In any event, I would have granted relief against forfeiture on this ground and on the other grounds also specified as breaches in the Notice of Termination. I explain my reasons further below.
The plaintiffs also claim reimbursement for certain costs and expenses spent on maintenance of the sewerage and effluent system. For the reasons I give below, I find that the cost of maintenance of that system was the responsibility of the plaintiffs. Even if that conclusion is mistaken, neither the lease nor the management agreement oblige The Alternative Web to meet the ongoing costs of maintaining and repairing the caravan park’s effluent system. I dismiss the plaintiffs’ claim for reimbursement of those costs. I also dismiss the plaintiffs’ claims for the maintenance and repair of the ablution block for similar reasons.
On the other hand, the plaintiffs are entitled to reimbursement for the costs of repairing electricity and building infrastructure and I allow in part their claims for that expenditure.
The plaintiffs further claim pursuant to the terms of an oral agreement by which they were engaged to prepare some ground on Piece 51 for the installation of a tennis court and a subsequent oral contract under which they were engaged to restore the land so prepared because The Alternative Web had decided not to proceed with the installation. For the reasons appearing below, I find that the plaintiffs were engaged to perform that work and are entitled to reasonable remuneration for it.
The plaintiffs finally claim reimbursement for expenses and work done in maintaining lots 9 – 61 as a result of the failure of the villa complex development. I would allow the plaintiffs’ claim only to the extent that Mr Schmidt requested that it be performed and agreed to pay the reasonable costs of the work. I find that work performed by Mr Kelly on the villa lots when there was no specific request to do so, or agreement to pay for it, was work performed to enhance the operation of the caravan park and I therefore dismiss the plaintiffs’ claim for those expenses. I give my reasons below.
The Demised Premises – Rates and Taxes
Mr Kelly first made enquiries about purchasing the caravan park business before both the land and business comprising the Blanchetown Caravan Park were purchased by The Alternative Web in January 2004. After it was purchased by the defendant, Mr Kelly commenced to negotiate the purchase of the caravan park assets and a lease over Piece 51 with Mr Schmidt. Sometime after the negotiations commenced, a plan emerged to develop Piece 51 so that it comprised both a caravan park and the villa complex. The villa complex was to comprise holiday villas built on individual allotments on 99 year leases.
The negotiations between Mr Kelly and Mr Schmidt proceeded on the basis that the plaintiffs would have an exclusive right of occupation of that part of Piece 51 on which the caravan park was established but would have a license to access recreational areas and services together with the occupants of the villas. The negotiations between Mr Kelly and Mr Schmidt also proceeded on the basis that the plaintiffs would be appointed to manage the villa complex.
The negotiations resulted in the preparation of four documents. On 13 August 2004, The Alternative Web’s solicitor, Ms Graves, sent an email to Mr and Mrs Kelly and their solicitor, Mr White. The email attached what were hoped to be the final drafts of a management agreement; an agreement for the sale of the assets of the caravan park and a lease over that portion of Piece 51 on which the caravan park would operate. The fourth document, which recorded the consent of The Alternative Web to the mortgage by the plaintiffs of their lease to their financier, the National Australia Bank, was later prepared by the bank.
Ms Graves’ email also attached a plan which was described as a “plan of the complex for Schedule 2 of the Management Agreement”. The plan was in fact the first of the several attachments to the email. The plan divided most of Piece 51 into allotments numbered A1 - A61 and A201 - A208. An area outside of the areas delineated as separate numbered allotments on the plan was marked with the letter “A”. The management agreement recited that The Alternative Webb was the owner of the “whole of the land contained in Volume 5891 Folio 829 and known as the caravan park situated at Lot 50 and 51 River Drive, Blanchetown inclusive of the allotments 9 - 61 and the common areas shown in the plans contained in Schedule 2 (‘the Complex’) and wishes to provide for the better management of the complex”. The draft of the attached lease defined the leased land as “Piece 51 … but excluding lots 9 to 58 and the areas marked common on GRO plan”. The definition of “premises” in the Second Schedule to the draft lease also excluded the “area marked ‘common’ as delineated in the plan annexed hereto”. It will be observed, therefore, that there was an inconsistency between the plan which identified the area outside of the allotments with the letter “A” and the terms of the lease and the management agreement which anticipated that the word “common” would be used to identify the land which would be shared.
In late August 2004, Ms Graves again wrote to Mr White enclosing versions of the lease, the management agreement and the sale agreement which had been executed by The Alternative Web. Ms Graves adverted to the inconsistency between the plans and the agreements to which I have just referred and informed Mr Kelly and Mr White that:
The Lease has been amended to comply with the survey plan, so it now reads the area marked ‘A’ rather than the area marked ‘Common’.
The first panel of the pro-forma covering pages headed “Memorandum of Lease” sent by Ms Graves records that the lease was over land comprised in Certificate of Title Register Book Volume 5891 Folio 829. In the last panel of those covering pages the leased land was defined to be:
Allotment comprising piece 51 deposited plan 61269 in the area named Paisley but excluding lots 9 to 58 and the areas marked ‘A’ on GRO plan number
The Second Schedule to the lease described the premises which were leased as:
Blanchetown Caravan Park River Drive, Blanchetown, SA, 5357 or more particularly Piece 51 Deposited Plan 61269 in the area named of Paisley CT reference Volume 5891 Folio 829 but excluding lots 9 – 61 inclusive and the area marked ‘A’ as delineated in the plan annexed hereto.[1]
[1] The discrepancy as to the exclusion of allotments A59 – A61 was not pursued in the proceedings before me.
The reference to the word “common” was, however, retained probably by oversight in cl 3.2 of the lease, which reads:
Provided however that in respect to these parts of the Premises marked common on the GRO Plan annexed hereto the Lessors right to occupy shall not be exclusive and shall be in common with the Lessor and any Lessee (and their invitees) on lots 9 - 61 on the GRO plan.
I pause here to deal with the plaintiffs’ contention that the word “Lessors” in cl 3.2 should read “Lessees”. I agree that that is manifestly the intended meaning of the clause. Rectification in those terms is not opposed and I so order. I deal further below with the difficulty caused by what I find to be the false premise on which the clause proceeds, namely that the premises, as defined, includes the area marked common.
A plan was attached to the management agreement, which had also been executed by The Alternative Web, sent by Ms Graves in late August. The plan identified that part of Piece 51 which fell outside the delineated allotments with the letter “A”. Even though he had suggested in an affidavit sworn on 17 July 2008 that the map was added to the management agreement without his consent or knowledge, Mr Kelly testified that when he signed the management agreement, the map of Piece 51 was attached to it. Moreover Mr Kelly agreed that the allotment numbers referred to on the face of the lease were references to allotment numbers appearing in that plan.
Mr and Mrs Kelly executed the lease on 2 September 2004. Mr Kelly testified that he inserted that date on the lease when he executed it. The management agreement and the asset sale agreement were signed by them on or before that date. On or about 10 September 2004, they also executed a deed whereby The Alternative Web consented to the mortgage of the lease to the National Australia Bank. Settlement on the transactions was effected on 10 September 2004.
At some point after execution of the lease by Mr and Mrs Kelly, the solicitor for The Alternative Web made some amendments to it apparently for the purpose of effecting its registration. The definition of the leased land appearing in the last panel form was struck through in pen and apparently initialled by Ms Graves. A definition of the leased land was then handwritten into the first panel form of the pro-forma cover sheet which provides for the specification of the Certificates of Title being leased. The handwritten definition read as follows:
THE WHOLE OF THE LAND IN THE CT BUT EXCLUDING LOTS A9 TO A58 AND THE AREAS MARKED ‘A’ ON THE GRO PLAN NUMBER GP
The handwritten amendment also appears to have been initialled by Ms Graves. At a subsequent time, the number 58 was struck out and replaced with the number 61 and the number 410/2004 inserted after the letters GP. Later again the handwritten description in the first panel form was struck through by pen and the words “see Annexure B1” inserted. Annexure B1 reads:
CERTIFICATES OF TITLE BEING LEASED
Lots A1 to A8 inclusive and Lots A201 to A208 inclusive portions in GP410/204 being portion of the whole of the land in CT Volume 5891 Folio 829.
Counsel for The Alternative Web submitted that the changes were effected to comply with a requirement that the definition of the leased land be expressed in terms of that part of the Certificate of Title that was leased rather than expressing in the negative parts of the Certificate of Title that were not leased. Even though Ms Graves was not called to give that explanation, the explanation suggested by counsel does seem probable. However, those amendments cannot help me to identify the land which the parties intended to include in the lease because the amendments were made unilaterally after Mr and Mrs Kelly had executed the lease.
Even though no plan was actually annexed to the lease when it was executed, a plan of Piece 51 deposited in the General Registry Office was received into evidence. The deposited plan was approved on 16 November 2004. It bears the number GP 410/2004, which I assume is the instrument number given by the Registrar-General of Deeds pursuant to s 31 of the Registration of Deeds Act 1935. On the deposited plan the land in Piece 51 outside of the delineated allotments is marked as “COMMON”. However, the letter “A”, albeit struck through with two lines, also appears on the plan immediately above the word “COMMON”. A roadway shown on the deposited plan is also separately designated with the letter “B”. The plan bears the file reference 03096E/DLP/01/V3, which was given to it by Civil Survey and Design, the surveyors who prepared it. The plan emailed by Ms Graves on 13 August 2004 bore the file reference 03096E/DLP/01/V1. Another plan bearing the General Registry Registration number GP410/2004 and the surveyor’s reference 03096E/DLP/01/V3 was also received into evidence as an attachment to a letter from The Alternative Web’s solicitor demanding a proportion of the rates and taxes levied on Piece 51 from Mr and Mrs Kelly. That plan did not exhibit any indication that it had been approved and accepted by the General Registry Office. In that version of the plan an area outside of the delineated allotments is marked “Common” but no letter “A” appears. Yet another plan of Piece 51 was attached to Mr Schmidt’s affidavit sworn on 14 July 2008. That plan does not exhibit a General Registry number nor a surveyor’s file reference. It marks different parts of the common area with the letters “A”, “B” and “C”. There is no suggestion that the two last mentioned plans were exchanged between the parties in the course of their negotiations and they can therefore be ignored.

It is implicit in the several definitions of the land being leased, as they appeared in the lease, at the time of execution by the parties, that the parties anticipated the lodgement of a plan with the General Registry Office which would delineate the land excluded from the lease; “lots 9 – 58 [or 61] and the areas marked ‘A’”. It is implicit in that definition that the parties had reached agreement on the precise boundaries of the land that had been excluded and that their agreement was recorded on a plan that they anticipated would be lodged in due course. In short, the lease contains an internal reference to a further document with which it is to be read; namely, a plan on which the excluded areas are delineated, but that plan is not attached to the lease. It follows that the lease as executed does not purport on its face to be the entirety of the writing recording the parties’ agreement.
The executed lease being incomplete, it is both necessary and permissible to have regard to the surrounding circumstances to identify the plan to which it refers. In my view there is no difficulty in identifying that plan. It is the plan that was provided by Ms Graves on 13 August 2004 and again in late August 2004 as an annexure to the executed management agreement. The common areas on that plan are marked with the letter “A”.
The lease was executed by the plaintiffs soon after, if not at about the same time as the execution of the management agreement. The management agreement refers to the lease. By cll 13.1 and 14.1.1, The Alternative Web and Mr and Mrs Kelly respectively were entitled to immediately terminate the management agreement if the other party was in serious or persistent breach of its obligations under either the management agreement or the lease. The lease was set out as Sch 1 to the management agreement. Schedule 2 of the management agreement is a map of Piece 51 on which the letter “A” marks that part of Piece 51 which is not comprised in the separate allotments.
The management agreement requires the manager to keep clean and maintain that part of the villa complex that is described as “Common Property”. Common Property is defined as so much of the complex as does not form part of the leasehold sites on which the holiday villas were to be erected. The villa complex itself is described as “Allotments 9 – 61 and the Common Areas shown in the plans contained in Schedule 2”. The “Common Areas” are, by necessary implication, the areas marked “A” in the plan.
The lease itself also expressly refers to the management agreement. By cl 2.38 of the lease, Mr and Mrs Kelly agree to comply with the management agreement. Moreover, cl 1 of the First Schedule of the lease records:
The Lessor and Lessee have entered into the Lease in consequence of the terms of the Management Agreement for the management of the business carried on at the Blanchetown Caravan Park, which the Lessor and Lessee both comply with.
Clause 7 of the First Schedule of the lease provides:
In the event that the Lessee transfers their [sic] rights and obligations pursuant to clause 11 of the Management Agreement and this Lease the Lessor shall release the Lessee from any further obligations with respect to the Lease and/or Management Agreement from the date of the transfer.
The inter-relationship between the lease and the management agreement is such that they can and must be read together and having regard to the parties’ common knowledge and understanding of the plans so drawn by Civil Survey and Design at the time the lease and management agreement were executed. I find that the area marked “A” on the plan which was attached to the management agreement was excluded from the definition of the land being leased found in the panel form and Item 9 of the Second Schedule to the lease. I would give primacy to the definition of the demised premises found in those parts of the lease expressly designated for that purpose. The intent of cl 3.2 of the lease is to record the parties’ agreement to share the common areas. Indeed the version of cl 3.2 in the draft lease sent by Ms Graves on 13 August expressly so provided. It is reasonably clear that in settling that draft of the clause the assumption was erroneously and inadvertently made that the common areas had been included in the demised premises. I find that the plaintiffs were given exclusive possession only of allotments A1 – A8 and A201 – A208 but were granted a licence to enjoy the area marked “A” on the plan attached to the management agreement in accordance with cl 3.2 of the lease.
After the registration of the lease, a dispute arose between The Alternative Web and its financier, Angus Securities Limited, and proceedings were instituted in this Court. In the course of those proceedings an order was made with the consent of Angus Securities Limited, The Alternative Web and Mr and Mrs Kelly rectifying the panel form of the lease as registered so that it included an endorsement of the consent of Angus Securities to the grant of the lease and including the consent of The Alternative Web to the mortgage of the lease to the National Australia Bank. The preamble to the order noted that a copy of the lease given over a portion of the land comprised in Certificate of Title Register Book Volume 5891 Folio 829 was attached to the order. The lease so attached is the lease as finally amended by Ms Graves. In my view, in consenting to the orders of the court the parties proceeded on the common basis that the demised premises were properly described in annexure B1. If I were to uphold the plaintiffs’ contention in these proceedings, Angas Securities Pty Ltd will be taken to have consented to the mortgage of a lease of a significantly greater part of the security it holds for the advances it has made to The Alternative Web. In the circumstances an estoppel by convention has arisen.[2] In my view, the plaintiffs are estopped by reason of the position they took in those proceedings from now contending otherwise. For that reason too I would hold that they are not entitled to exclusive possession of the area marked “A”.
[2] Palm Gardens Consolidated Pty Ltd v PG Properties Pty Ltd [2009] SASC 311 at [97] – [102].
The Alternative Web has in the past demanded a contribution from the plaintiffs to rates and taxes levied over Piece 51 on the basis that the area marked “A” was leased to Mr and Mrs Kelly. On my finding, that demand was misconceived, but the mere making of the demand is not reason enough to estopp it from contending that the area marked “A” has not been leased. The plaintiffs do not contend that they were induced by that demand to order their affairs on the assumption that they leased the area marked “A”.
It is now necessary to apply my finding as to the area leased to those provisions of the lease which impose an obligation on Mr and Mrs Kelly to pay a proportion of the rates and taxes levied on Piece 51.
Clauses 2.3 and 2.4 of the lease provide:
2.3To pay promptly all Council rates, Water and Sewer rates Emergency Services Levy building fire and all perils insurance premiums and any other charges and all other like outgoings assessed or levied or payable in respect of the Demised Premises, and all charges for gas, electricity, oil, telephone and all other like Services supplied (either by the Lessor or any other person or authority) to or consumed in or on or in respect of the Premises AND if the term or any portion of the Term does not coincide with any period to which any such assessment or levy applies then the same shall be apportioned between the Lessor and the Lessee so that the Lessee is not liable for the proportion which is outside the period of the Term.
2.4If the Premises are not individually assessed or levied, then the proportion of the rates taxes and other charges payable by the Lessee pursuant to sub-clause 2.3 shall be the proportion specified in item 12 of the Schedule.
Item 12 of the Schedule provides:
The Lessor will pay the rates and taxes for the Units (which are excluded from this Lease) as separately assessed.
The rates and taxes levied on Piece 51 are levied “in respect of the Demised Premises” even though Piece 51 is not comprised of the Demised Premises alone. Those rates and taxes are not levied separately on the land which I have found was leased to Mr and Mrs Kelly. Mr and Mrs Kelly are therefore required to pay the “proportion specified in Item 12”. Item 12 does not stipulate the proportion as a percentage of the rate or tax. However, in my view it is not necessary that it do so. Item 12 excludes from the rate and tax liability of Mr and Mrs Kelly only such rates and taxes on the excluded “units” (allotments A9 – A61) which are separately assessed. In the absence of any such separate assessment, Mr and Mrs Kelly must pay the whole of the rates and taxes assessed on Piece 51. However, The Alternative Web only claims 76.14 per cent of the rates and taxes and so I will find for it to that extent. I will hear the parties further on the precise amount now payable.
A transfer of the lease?
In June 2003, even before it purchased the Blanchetown Caravan Park, The Alternative Web sought approval from the Development Assessment Commission “to develop 50 transportable cabins on the site of the existing caravan park”. Approval for what was described as “50 additional self-contained cabins and associated carports and verandahs” was granted on 30 January 2004. The reference to “additional self-contained cabins” implies that the proposed development was an expansion of the existing caravan park. Furthermore, it was a condition of the approval that “a reticulated (potable) water system be connected to each of the cabins proposed in this development. The current and future owners of the park must meet all responsibilities for the safety of the water”.
After it had obtained that approval, The Alternative Web engaged a real estate agent who commenced to advertise the “sale” of the allotments reserved for the villa complex.[3] On 23 May 2005, the Development Assessment Commission wrote to The Alternative Web conveying its opinion that the development marketed and described in the agent’s material constituted “a change of use from tourist accommodation to dwellings” and that no application for such development approval had been made. The position taken by the Development Assessment Commission effectively put an end to the villa complex development. The failure of that development negated an important part of the basis on which the parties had negotiated their agreements in mid 2004. Both parties expected that the villa complex development would provide substantial financial benefits; The Alternative Web from the price obtained for the 99 year leases and the plaintiffs from the payment of service fees through the management agreement. The financial viability of the caravan park itself was compromised. Subsequently, in late 2004, Mr and Mrs Kelly appointed a manager, Ms Curry, to run the caravan park for them whilst they returned to Watervale where Mr Kelly resumed his weed control business.
[3] The plan to which I referred in [24] above which marked the common area with the letters “A”, “B” and “C” appears to have been drawn to market the villa complex.
From late 2004 the parties fell into dispute over the payment of rent and rates and other matters. Following a mediation of those disputes, which was held in January 2006, the parties agreed that they would attempt to sell their respective interests in the land and business assets of the Blanchetown Caravan Park. The premises were advertised for sale in about March 2006. Mr Schmidt subsequently showed some interested persons around the caravan park. One of those persons was Mr Fidge. Mr Fidge decided against purchasing the land but in about September 2006 he contacted Mr Kelly and expressed an interest in purchasing the leasehold interest in, and the business of, the caravan park. Mr Kelly testified that soon thereafter he informed Mr Schmidt that a person, whom he did not identify, and who had inspected the property, had approached him about purchasing the caravan park business. According to Mr Kelly, Mr Schmidt encouraged him to attempt to sell the business.
Mr Kelly deposed that he met Mr Fidge at the caravan park in early November 2006 and that he told him on that occasion that the consent of Mr Schmidt was a necessary precondition to any sale.
In December 2006, Mr Fidge’s solicitors wrote in the following terms to Mr Kelly’s solicitors:
Our client makes the following offer:-
1.Our client had the option to purchase the lease and business (including the management rights) for $270,000 with settlement to be within 2 years.
2.That our client take over the management of the park on the 19^th of December 2006 on the basis of paying your client $1000 plus GST each week. Such an agreement to be for a period of two years or until such time as the lease is purchased.
3.That our client pay $50,000 for the business assets at the takeover.
4.Our client lend your client $50,000 at the takeover on the following basis:-
4.1The sum be interest free.
4.2    The sum be repaid upon the happening of the earlier of the following events:-
a)the option is exercised, or;
b)our client surrenders management of the park for whatever reason.
4.3    The sum be secured at the expense of our client by way of:-
a)a bill of sale over the assets and
b)a second mortgage over the lease.
5.The parties do such things and sign such documents including formal agreements prior to the takeover to give effect to the spirit of this agreement.
6.Notwithstanding the above, once our client has completed its due diligence and:-
a)is satisfied with its enquiries and;
b)    has obtained the Landlord’s consent to both a Transfer of the Lease and a mortgage over that to its Bank on the Bank’s terms.
Then it will exercise the option and complete the purchase. (emphasis added)
According to Mr Kelly, in late 2006 Ms Curry notified him that she was not prepared to continue to manage the caravan park because of the poor financial return it provided. As a result Mr Fidge commenced operating the kiosk in December 2006, but Ms Curry continued to manage the caravan park itself until the end of December. Mr Fidge was engaged to manage both the kiosk and caravan park from 1 January 2007. The Alternative Web does not contend that the mere appointment of a manager is a breach of the lease of the caravan park.
As the negotiations for the sale of the caravan park business progressed, Mr Fidge’s solicitors prepared several versions of a document entitled Heads of Agreement to record the terms on which the sale would be made. The parties to the Heads of Agreement were Mr and Mrs Kelly and Fidge Barrett. The Heads of Agreement which was eventually executed by those parties recites:
G.The Kelly’s [sic] have agreed to sell their interest in the Blanchetown Caravan Park, being:
- the lease
- the management rights
- the plant and equipment
For $320,000 plus GST under the following bases:
$50,000 non-refundable deposit
$50,000 by way of loan secured by way of a charge over the lease together with the plant and equipment
$220,000 at settlement.
H.The parties will prepare and execute the necessary documents to facilitate the sale promptly.
Clause 5 of the Heads of Agreement provided:
If for whatever reason settlement does not take place on or before the 3^rd January 2009, Fidge Barrett will vacate the caravan park upon repayment of the $50,000 loan.
The executed version of the Heads of Agreement appears to have been prepared at least by 29 December 2006 because on that date it was faxed to the Clare Caravan Park which was, at about that time, also operated by Mr and Mrs Kelly. However, Mr Kelly had no recollection of receiving that facsimile of the Heads of Agreement. Mr Kelly testified that he obtained the executed version of the Heads of Agreement on 3 or 4 January 2007 when he visited the Blanchetown Caravan Park for the purpose of discussing it with Mr Fidge.
Mr Kelly testified that he arrived at the caravan park soon after 8:00 am Mr Fidge asked him to sign the Heads of Agreement. From facsimile imprints on the first page of the executed version of the Heads of Agreement it appears to have been sent by facsimile to the landline 8533 2599 at 1:00 pm on 3 January 2007 and to the landline 8555 2926 at 10:35 am on 4 January 2007. The former number is the landline of the Adelaide office of Mr Fidge’s solicitors; the evidence does not reveal the location of the other facsimile machine. Mr Kelly explained that he did not at that time subscribe to the document because he was concerned that he should first obtain Mr Schmidt’s consent and because his solicitor was on leave.
Mr Schmidt arrived about an hour later. He was accompanied by a person who described himself as a friend or associate and said that he was into “real estate”. According to Mr Kelly, Mr Schmidt, who did not appear surprised when he was introduced to Mr Fidge as a potential purchaser, said words to the effect: “I thought it would be you”. An inspection of the caravan park followed, during which Mr Schmidt complained about the condition it was in.
Mr Kelly testified that there was then the following exchange with Mr Schmidt:
Mr Schmidt asked me directly if we had come to an agreement to buy the caravan park. I told him we had. He asked me if I had signed the contracts and done the deal. I said ‘No, not as yet’. I said ‘I need your consent before I can do that’. He then told me words to the effect, and I’m not sure of the exact words now, but basically just ‘Stop talking about it’ and ‘I’m more than happy for Fidge to be here’. ‘Stop mucking around and get on with it. Get it signed and let’s move forward’. We then walked back to the office.
Mr Kelly testified that, influenced by Mr Schmidt’s comments, he signed the Heads of Agreement on that very day after Mr Schmidt had left the caravan park. Mr Kelly said that before he subscribed to it he reiterated that the consent of The Alternative Web would be required. Mr Kelly agreed in cross examination that he took a signed copy of the Heads of Agreement with him when he left Blanchetown that day.
Mr Schmidt testified that Jack Fidge and Deborah Barrett were amongst the people who made enquiries about purchasing Piece 51 during 2006. He went on to say that in late 2006 he received a telephone call from Ms Curry suggesting that she had been removed from the park and was being replaced by another man as manager. As a result of that conversation he travelled to Blanchetown in late November or early December 2006 with his friend William Ward and met Mr Fidge and Mr Kelly there.
Mr Schmidt testified that Mr Fidge was introduced to him as the new manager and not as a prospective purchaser of the business. Mr Schmidt explained that he was “a little bit amused” that Mr Fidge had been engaged as the manager because of his scruffy appearance but said that he did not make any objection to his engagement. Mr Schmidt agreed that he took the opportunity to point out work that had to be undertaken in order to comply with the management agreement. Mr Schmidt denied that there was any discussion about the transfer of the leasehold interest to Mr Fidge and in particular denied that he had encouraged or even consented to that course.
Mr Schmidt testified that he had no recollection of visiting the park in January. On the contrary, he said that after December 2006 he did not return to Blanchetown until 7 February 2007 on which day he obtained a copy of the Heads of Agreement from Mr Fidge.
In an affidavit sworn on 9 May 2007, Mr Schmidt deposed as follows:
4.I refer to paragraph 38 of the Kelly affidavit. Kelly did not speak to me in September 2006 as alleged about a possible sale of the leasehold interest. The first time anything was mentioned to me about a possible sale was, to the best of my recollection, in November 2006. I had just become aware that Mr Fidge was at the caravan park, was told that he was there as a manager for Kelly, and was told that there may be a Heads of Agreement (‘HOA’) being readied. I asked for a copy of it but was not given one. The first time I saw a copy of a HOA between Kelly and Fidge Barrett Pty Ltd (‘Fidge’) was in early February 2007.

When giving evidence Mr Schmidt gave similar evidence about requesting a copy of the Heads of Agreement when he visited Blanchetown in December, but both his deposition and his testimony to that effect are inconsistent with his claim that there was no discussion about the transfer of the business to Mr Fidge. Mr Schmidt also testified that, although Mr Kelly was also present on the occasion when Mr Fidge refused to supply a copy of the agreement, Mr Schmidt had no recollection of asking Mr Kelly for a copy, or Mr Kelly refusing it.
In his affidavit of 9 May 2007, Mr Schmidt also deposed that:
5.I refer to paragraphs 50 to 54 inclusive. To the best of my recollection, I visited the caravan park just before Christmas 2006, as I was concerned about its management with the holiday season about to commence. William Ward, a friend of mine, was with me. I was told that Mr Fidge was to be the new manager in place of the previous managers. I had no issue with that, and took the opportunity to walk around the park with Mr Fidge to show him what needed to be done so as to comply with the terms of the Management Agreement.
When asked to reconcile the difference between those paragraphs of his affidavit and his sworn testimony Mr Schmidt answered:
It’s just, you know, it’s a long time ago and it’s confusion, the confusion – I do apologise. This is obviously back in around that period and I agree with clause 4 [of the affidavit].
The Alternative Web invoiced Fidge Barrett for rent for the period between December 2007 and June 2008. Mr Schmidt explained in his evidence that he did so to ensure that the rent was paid. It appears that the practice in fact led to some double payments.
Mr Ward was not called as a witness; according to Mr Schmidt he was in gaol at the time of the hearing.
I was favourably impressed by Mr Kelly’s demeanour as a witness. I also find his account of the discussions at the Blanchetown Caravan Park in early January 2007 more consistent with objective facts and to be inherently more probable than Mr Schmidt’s.
In particular, on his own admission, Mr Schmidt had heard that Mr Kelly might be negotiating for the sale of the caravan park business to Mr Fidge before he met them in Blanchetown. I would therefore have expected him to ask whether Mr Fidge was merely a manager or a prospective purchaser. That is precisely what Mr Kelly says he did do but Mr Schmidt denied that he made any such enquiry. Equally if Mr Kelly was present on the occasion when Mr Schmidt asked Mr Fidge for a copy of the Heads of Agreement it could only be because all three had discussed it. Such a discussion could only have occurred when Mr Schmidt visited Blanchetown with his friend Mr Ward but that was denied by Mr Schmidt. Finally, if Mr Fidge had refused Mr Schmidt a copy of the Heads of Agreement, I would have expected Mr Schmidt to demand a copy from Mr Kelly but Mr Schmidt gave no such account.
On the other hand, it is inherently probable that Mr Schmidt would have encouraged Mr Kelly to sell the business so that he might rid himself of someone whom he considered to be a very troublesome tenant.
For the above reasons, I find that Mr Schmidt met Mr Fidge and Mr Kelly at the Blanchetown Caravan Park on about 4 January 2007. He was told of the proposed transfer of the lease and business of the caravan park to Mr Fidge and encouraged Mr Kelly to proceed with it. Mr Kelly executed the Heads of Agreement after Mr Schmidt left. The agreement to lease so made was, however, conditional on the formal, written, consent of The Alternative Web.
Clause 2.7 of the lease provided:
Subject to the Retail and Commercial Leases Act and in particular sections 43 and 45 not to transfer assign sublet or part with the possession of the premises or any part thereof without the consent in writing of the Lessor which consent shall not be unreasonably withheld other than in the case of a transfer assignment subletting or parting with possession other than in the following circumstances:-
(a) if the proposed assignee proposes to change the use of which the shop is put; or
(b)if the proposed assignee is unlikely to be able to meet the finance obligations of the Lessee under the Lease; or
(c)if the proposed assignee’s retailing skills are inferior to those of the assignor; or
(d)if the Lessee has not complied with procedural requirements for obtaining the lessor’s consent. …
In these circumstances Mr and Mrs Kelly did not part with possession of the caravan park. It may be that Fidge Barrett held an equitable interest in the caravan park under the Heads of Agreement.[4] However, cl 2.7 does not prohibit all dealings with, or the disposal of any interest in, the demised premises. It is limited to dispositions which are effective in law. I hold that an equitable transfer or assignment of the lease, or sublease of the caravan park, which is subject to the landlord’s consent, does not breach cl 2.7 of the lease.[5]
[4] See, generally, GPT Re Ltd v Lend Lease Real Estate Investments Ltd [2005] NSWSC 964 at [55]-[57].
[5] Hill v Short [1910] SALR 141 at 146.
Validity of The Notice of Termination
On 13 March 2007, Mrs Schmidt signed two separate Notices of Termination with respect to the management agreement and the lease respectively. The relevant terms of the Notice of Termination of the lease were as follows:
NOTICE OF TERMINATION AND RE-ENTRY
To:    Barry David Kelly and Joanne Faye Kelly
Premises at Blanchetown being the Blanchetown Caravan Park, River Road, Blanchetown, South Australia (the Premises)
RECITALS
1.You are the lessee of the Premises of which The Alternative Web Pty Ltd ACN 089 249 159 of c/- Caracoussis & Co, Level 2, 148 Greenhill Road, Parkside, SA, 5063 (‘Lessor’) is the lessor, pursuant to a lease registered number 10067189 dated 2 September 2004 (‘Lease’).
2.You are in breach of the lease in that:
2.1    You have permitted Fidge Barrett Pty Ltd, or some other person unknown to the Lessor, to conduct business on their own account in the premises without the prior consent of the Lessor since at least 3 January 2007, contrary to clause 2.7 of the lease.
2.2    You have parted with possession of the premises since at least 3 January 2007, contrary to clause 2.7 of the lease.
2.3    You have purported to assign the lease to Fidge Barrett Pty Ltd pursuant to a written agreement between yourselves and Fidge Barrett Pty Ltd, said to be dated ‘January 2007’ contrary to the proviso to clause 2.7 of the lease and without regard to the provisions of clauses 2.7.1 to 2.7.7 of the lease.
2.4    You have failed to pay the Rates Taxes and other charges pursuant to clause 2.3 of the lease since the day you entered into possession of the premises.
2.5    You have failed to pay the rent on due date since the day you entered possession of the premises and are in default as provided in clause 4.1.1 of the lease.
2.6    You have failed to insure the premises pursuant to clause 2.28 of the lease, alternatively you have failed despite requests to do so to provide to the Lessor the insurance documents as required by clause 2.23 of the lease.
3.You have breached the terms of the Lease as described above and the Lessor is entitled to terminate the Lease and re-enter upon the Premises pursuant to clause 4.2 of the lease.
4.Alternatively by your actions described in paragraphs 2.1 to 2.3 of this notice you have repudiated the Lease, which repudiation the Lessor accepts.
NOW TAKE NOTICE THAT the Lessor HEREBY TERMINATES the Lease and or ACCEPTS YOUR REPUDIATION of the lease and will re-enter upon the Premises forthwith.
The Lessor expressly reserves it rights pursuant to the terms of the Lease and the law.
DATED [13] March 2007
…………………………………………………
The Alternative Web Pty Ltd
The Notice of Termination was served on Mr Kelly on 19 March 2007. On 9 February, The Alternative Web’s solicitor sent an unsigned copy of the Notice of Termination to Mr Kupke, the branch manager of the National Australia Bank with whom Mr and Mrs Kelly dealt. Mr Kupke was informed that The Alternative Web would “issue” the Notice of Termination “31 days from now”. On 16 February, Mr Kupke informed Mr Kelly by telephone that he had received a notice that Mr Kelly would be evicted. Mr Kupke sent a copy of the notice to him.
Section 10 of the Landlord and Tenant Act 1936 provides:
No re-entry till notice to tenant to remedy breach
A right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant or condition in the lease shall not be enforceable by action or otherwise, unless and until—
(a)the lessor serves on the lessee a notice specifying the particular breach complained of, and, if the breach is capable of remedy, requiring the lessee to remedy the breach, and in any case requiring the lessee to make compensation in money for the breach; and
(b)the lessee fails within a reasonable time thereafter to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money to the satisfaction of the lessor for the breach.
The Alternative Web submits that the receipt by Mr Kelly of what was, at that time, an unsigned and undated “proposed” Notice of Termination was sufficient to comply with s 10. I reject that submission. The document was not a notice because The Alternative Web had not subscribed to it in a way which evinced an intention to put Mr and Mrs Kelly on notice. Nor was the notice “served” on Mr and Mrs Kelly by The Alternative Web; they adventitiously received it from their bank manager.
If Mr and Mrs Kelly had breached the lease by subletting or parting with possession, there is authority that the breach could not be remedied.[6] Some cases appear to distinguish between breaches of positive and negative covenants. It is said that the former are remediable by subsequent performance but committing an act prohibited by the latter cannot be. However, it might equally be said that the failure to perform on time cannot be cured; the distinction perhaps reflects a view about the unimportance of timely performance. As Russell LJ points out in Scala House and District Property Co Ltd v Forbes,[7] the real difficulty is that even though the breach of a negative covenant which is continuing might be said to be remediable by the lessee desisting, the same is not true of a breach which is over by the time the notice is sent; why should the former be classified as remediable and the latter irremediable. The solution as to the dilemma may be that in the case of a continuing breach, whether of a positive or negative covenant, the past breaches cannot be remedied but the present continuing breaches can be. In my respectful opinion, it is difficult to see why an unauthorised parting of possession which is continuing cannot remedied if the original tenant is able to procure the surrender of the sublease or assignment which he has given without consent.[8] The purpose of the notice is to give the lessee the opportunity to contain the scope and extent of his breach so that, either the lessor may in the statutory breathing space they are both given relent, or, alternatively, the lessee may gain the advantage of being able to demonstrate, in an application for relief, that he has reformed.
[6] See, eg, Scala House and District Property Co Ltd v Forbes [1974] QB 575.
[7] [1974] QB 575.
[8] Batson v De Carvalho (1948) 48 SR (NSW) 417.
Nonetheless, I am prepared to proceed on the basis that a parting of possession cannot be remedied and that, therefore, it was not necessary that the Notice of Termination require that breach to be remedied. Furthermore, if The Alternative Web did not require compensation for what I will assume was an irremediable breach, it may not have been necessary for the Notice of Termination to require it in order to comply with s 10 of the Landlord and Tenant Act 1936;[9] the rationale for that principle appears to be that because subclause (b) of s 10 of the Landlord and Tenant Act 1936 prohibits enforcement only if the lessee fails to make “reasonable compensation in money to the satisfaction of the lessor”, there is no point in demanding something the lessor will not be satisfied with. If no compensation is desired, and the breach cannot be remedied, a notice merely specifying the breach might sufficiently comply with s 10 of the Landlord and Tenant Act 1936.[10] However, even if that be the case, s 10 plainly denies the enforceability of any right of termination or re-entry unless and until a notice specifying the breach is given, even though the provision of the notice may serve no apparent purpose other than to allow the tenant some time to attempt to resolve the dispute by negotiation. In this case, no notice was served and the termination purportedly effected by the Notice of Termination was therefore ineffective.
[9] Lock v Pearce [1893] 2 Ch 271; Rugby School v Tannahill [1935] 1 KB 87; Gunnion v Ardex Acceptance Pty Ltd [1968] VR 547 at 551.
[10] Rugby School v Tannahill [1935] 1 KB 87.
The discretion to grant relief against forfeiture is wide and unfettered,[11] but the court will have regard to the desirability that contractual promises should be observed and contractual rights protected, and, even more, the undesirability of the law appearing to condone flagrant and contemptuous disregard of obligations.[12]
[11] Shiloh Spinners Ltd v Harding [1973] AC 691 at 722, 726-7.
[12] Shiloh Spinners Ltd v Harding [1973] AC 691 at 726-7.
For the reasons I have given, there was ultimately no transfer of possession; Fidge Barrett has vacated the premises pursuant to an agreement reached with the plaintiffs. Mr and Mrs Kelly are in possession of the caravan park and continue to operate it. The Alternative Web has not suffered any loss by reason of Mr Kelly’s execution of the Heads of Agreement; this is not a case of unlawful and discreditable use of the premises. Indeed, for some time The Alternative Web invoiced Fidge Barrett for the rent due and in that way obtained greater security for the payment of its rent. Furthermore, for some months it was paid rent both by the plaintiffs and Fidge Barrett. For those reasons, even if there had been a breach of the lease, and The Alternative Web had complied with s 10 of the Landlord and Tenant Act 1936, I would have exercised my discretion to grant relief against forfeiture.[13] Moreover, I have found that although consent in writing was not given, Mr Schmidt orally assented to the proposed lease when he visited the Blanchetown Caravan Park in January 2007; that circumstance alone would justify the provision of relief against forfeiture.
[13] Scala House and District Property Co Ltd v Forbes [1974] QB 575.
The Notice of Termination also refers to the failure to pay rates and taxes and a failure to insure the premises. For the reasons I have given, I find that no notice pursuant to s 10 of the Landlord and Tenant Act 1936 was provided with respect to those breaches. The plaintiffs have on occasion failed to pay the rent due in a timely fashion, however, as at the time of hearing there was no rent outstanding and no complaint was made in the hearing of a continuing failure to insure.
Section 9 of the Landlord and Tenant Act 1936 provides:
Relief against forfeiture for non-payment of rent
(1)In the case of any action in the Supreme Court for recovery of land on forfeiture for non-payment of rent, the court or a judge may, upon summons, give relief on equitable grounds in a summary manner, up to and within the same time after execution executed, and subject to the same terms and conditions in all respects as to payment of rent, costs, and otherwise, as would have applied in the Supreme Court in its equitable jurisdiction before the passing of the Supreme Court Act 1878.
(2)If the lessee, his executors, administrators, or assigns are so relieved, they shall hold the demised lands according to the terms of the lease and without any new lease.
(3)If such relief is granted, the court or judge shall direct a minute thereof to be made, by endorsement on the lease or otherwise.
Relief against forfeiture in the case of non-payment of rent is usually granted unless there is reason to believe that the tenant will not meet his or her future obligations.[14] A history of non-payment remains a relevant consideration,[15] but relief against forfeiture for non-payment has been granted even in cases where there is a history of irregular payments of rent.[16] If the lease had been validly terminated by the Notice of Termination on the grounds of the failure to pay rent or to insure, I would have granted relief against forfeiture.
[14] Jam Factory Pty Ltd v Sunny Paradise Pty Ltd [1989] VR 584.
[15] Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of New South Wales Ltd (1970) 2 BPR 9562 at 9575.
[16] Freemantle & District Trades Hall Industrial Association of Workers v Victor Motor Co Pty Ltd [1963] WAR 201.
The plaintiff also contends that the Notice of Termination is ineffective because The Alternative Web failed to comply with cl 4 of the Deed of Consent to Mortgage dated 10 September 2004. It is strictly unnecessary to decide this issue because I have found that the Notice of Termination does not comply with s 10 of the Landlord and Tenant Act 1936 but I shall nevertheless give my reasons for rejecting the plaintiffs’ contention on this issue.
Clause 4 provides:
Notification of default
4.1 The Lessor agrees to promptly notify the Bank of any Default.
Default capable of remedy
4.2If a Default is capable of remedy, then the Lessor must give the Bank 30 days’ notice in which to remedy the Default, before exercising any right to re-enter and end the lease.
Default not capable of remedy
4.3If a Default is not capable of remedy, then the Lessor must give the Bank 30 days’ notice in which to pay a reasonable amount of compensation for the breach, after exercising any right to re-enter and end the Lease.
I reject the plaintiffs’ contention based on cl 4 of the Deed of Consent. The Deed does not purport to modify the terms of the lease. Clause 4 merely provides to the National Australia Bank a modified, and contractual, form of the statutory protection that a tenant enjoys by reason of s 10 of the Landlord and Tenant Act 1936. If The Alternative Web were to engage in conduct which terminated the lease but was at the same time in breach of cl 4, it would be liable in damages to both the National Australia Bank and Mr and Mrs Kelly. However, the tripartite collateral contract does not change the nature and terms of the leasehold interest granted over the caravan park. Moreover, I would hold that, if the effectiveness of the Notice of Termination depended on compliance with cl 4, the notice given to Mr Kupke described in [67] above did comply with that clause. I acknowledge the omission of the words “to the lessors satisfaction” in cl 4.3, but I would imply those words in cl 4.3 because of the difficulty in objectively deeming what is reasonable compensation for all irremediable breaches.
Use of villa sites for caravan park
Mr Kelly testified that, prior to executing the agreements in September 2004, Mr Schmidt told him that the sites which were at that time used as caravan park sites could continue to be so used until villas were constructed on them. After Mr Kelly learnt that approval had not been given for the villa complex, Mr Schmidt told him that the sites could continue to be used as caravan park sites.
Relying on those representations, Mr Kelly hired out the sites. He did not insist on the relocation of the southern boundary and the provision of power for more sites in the allotment marked A201 which borders the southern boundary, as was his right pursuant to the lease and the management agreement. Clause 16.4 of the management agreement and cl 6 of the First Schedule to the lease provide that The Alternative Web would, at its cost, arrange for the construction of a fence along “the new southern boundary”. Mr Kelly testified that the alteration of the fence was necessary to allow access to the Septic Tank and Effluent System (STED). A portion of that fence encroached on to the caravan park site by some five or six metres. The purpose of moving the fence was to allow trucks to obtain access to the STED tanks without having to travel over land to the south of the caravan park.

Clause 16.4 of the management agreement and cl 6 of the First Schedule to the lease also provide that The Alternative Web would, again at its cost, provide water and electrical connections (power heads) to the caravan sites along the new boundary.
The agreement to provide connections for caravan and camping sites to be established along the southern boundary was necessary because of the reservation of allotments 9 – 61 for the villa complex development. Mr Kelly testified that the agreement with respect to providing more outlets for lot A201 was made in the course of a conversation at the Blanchetown Caravan Park. Lots A5 – A12 were the premium caravan parking lots and are kept free from semi-permanent occupation but lots A9 – A12 had been reserved for the villa complex and not leased to Mr and Mrs Kelly. At the time of the discussions between Mr Kelly and Mr Schmidt, lots A9 – A16 had power connections and were available for occupation by caravans or campers.
Allotment 201, together with part of the adjacent common area, can accommodate between 20 and 30 sites. At the time that the agreements were executed there was only one electrical power head at the western end of allotment 201. Two caravans could be powered from that outlet. As a result of further connections provided by Mr Kelly, between four and six caravans can be sited on allotment 201. The Alternative Web has not provided any additional connections for more caravan sites along the southern boundary.
Mr Kelly deposed that after the notification was received from the Development Assessment Commission which put an end to the villa complex development he had the following conversation with Mr Schmidt:
Mr Schmidt informed that the new development would not proceed, therefore there’s no need to power the site on the southern boundary there, we could move the caravans back onto the existing sites.
Mr Kelly testified that during 2006 Mr Schmidt encouraged him to increase the number of semi-permanent residents in order to increase the sale potential of the caravan park. Mr Schmidt testified that he could not remember exactly what was said on the question of moving the caravans back onto the villa complex site. He explained that he simply asked for the caravans to be removed from the villa allotments and acknowledged that he had not at first expressly asked for payment if they were to remain. Mr Schmidt testified in general terms that at some later time “conversations around that had happened”.
When Mr Schmidt was asked why he had not provided power heads for more sites along the southern boundary he said that there was no need for power in those areas at all. When it was put to him that he did not intend to power the sites he answered: “that will reflect, I suggest, on this court case”. He went on to explain that he would power the sites if he were ordered to. When asked why he had not already provided power to the sites he answered “purely out of frustration of the Kellys”. I then asked Mr Schmidt:
Q:When you spoke about frustrations, do you mean the fact that your position was that Mr Kelly wasn’t complying with what he had to do and so you weren’t going to comply with what, on one reading you might have had to do.
A:Yes.
Q:That’s what you mean by out of frustration.
A:Yes.
I was favourably impressed by the testimony of Mr Kelly on this topic. His account is also more probable. It served the interests of The Alternative Web to have the caravan park fully utilise the villa lots when the land and business were put on the market in 2006. For that reason, Mr Schmidt is likely to have encouraged Mr Kelly to put caravans on the villa allotments. Thereafter, The Alternative Web had nothing to gain by insisting that the plaintiffs confine themselves to the allotments that they had leased. To do so would have only precipitated a demand that The Alternative Web provide connections to establish more sites along the southern boundary. To the extent that the demand for profit earnt from renting the villa sites has been made in more recent times the damages to which The Alternative Web may have been entitled are at least equally balanced by the damages suffered by the plaintiffs by reason of its failure to power the southern boundary. I would therefore dismiss both the plaintiffs’ claim for damages for failure to provide power along the southern boundary and the defendant’s counterclaim for an account of the rents received by the plaintiffs. This is not an appropriate case for a mandatory injunction ordering the defendant to provide power to allotment 201. The financial viability of the caravan park operation is not good. Damages are an adequate remedy if the plaintiffs, for whatever reason, stop using the villa sites.
On the other hand, the use of the sites, which had been reserved for the villa complex, for the purposes of the caravan park discloses the real purpose served by much of the maintenance of the villa lots performed by the plaintiffs; it was for their benefit.
The boom gate
Clause 3 of the First Schedule of the lease records that the lessor and the lessee agree that a new boom gate shall be installed at the caravan park and that the cost of purchase and installation is to be equally shared between them. That clause provides that:
The parties will agree on the cost of the boom gate and the cost of installation before the work is undertaken.
Clause 3 records a common view about the desirability of the installation of a new boom gate but does not itself bind the parties to install the boom gate because installation of the boom gate is itself conditional on a further agreement as to the amount to be expended for that purpose. At most the clause binds the parties to negotiate in good faith with respect to its installation.
Mr Kelly explained that he had obtained a quote for the installation of boom gates and provided it to Mr Schmidt. According to Mr Kelly, Mr Schmidt informed him in about 2005 that The Alternative Web did not have sufficient funds to undertake any of the fit-out obligations contained in the lease. Mr Kelly installed a manually operated boom gate just before Christmas 2008 at a cost of $768.65.
I did not understand Mr Kelly to give evidence that he ever approached Mr Schmidt with a specific design and quote for the boom gate. Mr Schmidt denies that he was ever provided with a design or quote. I am not prepared to find that the discussions between Mr Kelly proceeded beyond general references to the terms of that clause.
Therefore I am not prepared to find that the response of Mr Schmidt discloses either a failure to negotiate in good faith or a repudiation of cl 3. I dismiss the plaintiffs’ claim on this head.
Shading of the pool – road signage
Clause 4 of the First Schedule to the lease refers to the installation of sails over the pool. No sails have been installed over the pool. Mr Kelly testified that Mr Schmidt informed him that he did not have sufficient funds to proceed with the erection of the sail shading. However, no quote for that work was provided. Mr Kelly himself testified that this matter was pursued with even less vigour than the boom gate. I am not prepared to find that there was a failure to negotiate in good faith or a repudiation by The Alternative Web of its obligations under cl 4 given the brief and general nature of Mr Kelly’s enquiries.
Clause 5 of the First Schedule of the lease provides that the parties agree that new road signage shall be installed at the caravan park. Again, the cost of the installation of the signage was to be shared between the parties and agreement on that cost was a pre-condition to the installation of the signs. No signage has been erected. As to the signage Mr Kelly testified:
The signage was a little bit different because the signage was related to the new resort. So it was always … put on hold a little bit until – because we didn’t know what to put on the signs, so it wasn’t pushed as hard on that.
For similar reasons to those just expressed with reference to cl 4, I am not prepared to find a breach of this clause.
Tennis court
Late in 2004, Mr Kelly was asked to prepare an area of the caravan park for the installation of a tennis court. Both Mr Kelly and Mrs Kelly described an occasion, probably in 2004 or early 2005, when Mr Schmidt, accompanied by Mrs Schmidt, promised Mr Kelly in the course of that conversation that he would reimburse him for the cost of preparing the ground for the installation of the court. Mr Kelly undertook that work with his son. The work was performed before the letter from the Development Assessment Commission to which I have referred was received. The tennis court was not installed. However, at about the time that the letter from the Development Assessment Commission was received Mr Schmidt telephoned Mr Kelly and asked him to make good the area which had been cleared for installation of the tennis court because it “was a mess and it was a disgrace”. According to Mr Kelly, Mr Schmidt agreed to reimburse Mr Kelly. Mr Schmidt denied instructing Mr Kelly to perform the work and that he had agreed to pay him. Mrs Schmidt was not called even though she was available to give evidence. I prefer the testimony of Mr Kelly. Moreover, it was in The Alternative Web’s interest to have the tennis court built. The site was eventually restored. I accept Mr Kelly’s evidence that he was so engaged.
I turn now to the precise amounts claimed for the preparation of the tennis court site and its subsequent restoration. I accept Mr Kelly’s evidence as to the time that it took to prepare and reinstate the site. Mr Kelly claimed $45 an hour for both his labour and his son’s. That amount appears to me to be reasonable in itself for casual labour amounting as it does to an hourly rate for each of them of about $22.50. It also appears reasonable by comparison with the hourly rate which Mr Kelly paid to semi-skilled labourers employed by him in his weed control business. Those labourers are paid between $55 and $70 an hour; I acknowledge that they do provide some equipment. I also accept Mr Kelly’s evidence about the payment made to contractors who performed part of the work. I acknowledge that Mr Kelly attributed some of the contractual charges to reinstatement of the site even though they related to work performed before the letter from the Development Assessment Commission was received. However, I am satisfied that Mr Kelly was either mistaken about whether the work was performed for the original preparation of the site or the later reinstatement of it, or alternatively that news of the Development Assessment Commission’s stance was received by Mr Schmidt before the letter arrived. I allow, therefore, this part of the plaintiffs’ claim in the sum of $4,311.50.
The maintenance obligations
The resolution of plaintiffs’ claims for reimbursement for maintenance work performed by them requires a consideration of the terms of both the management agreement and the lease. It will be remembered that the management agreement defined “Common Property” as so much of the complex as does not form part of the leasehold site. “Leasehold sites” here, in context, refers to the sites which were to be leased so that villas could be constructed on them. It does not include that part of Piece 51 which was leased to the plaintiffs for the purpose of operating the caravan park.
The management fee payable to the plaintiffs is the total of a letting commission payable for managing the rental of the villas and a fee in the sum of $15 per week with respect to each villa constructed on an allotment. By cl 6.2 of the management agreement The Alternative Web is responsible for the maintenance and upkeep of the lots until the time that the villa erected on the lot is occupied. The manager’s responsibilities are expressed generally to be the discharge of the functions necessary for the efficient and effective onsite management and administration of the complex as a modern caravan park and residential complex. Clause 6.3 gives greater particularity to that general expression without purporting to limit it. The manager is required to supervise employees and contractors engaged to work on the villa complex and to police observance of any bylaws. The manager is also required to keep the walkways, driveways and paved areas of the common property clean and to regularly sweep dust and clean other parts of the common property. The manager is further required to “report to The Alternative Web promptly details of any items requiring repair, and upon all hazards or dangers within the complex which come to its attention; and to take any reasonable and practical remedial action in relation to the relevant hazards, harms or dangers”: cl 6.3.10. Clause 6.3.12 requires the manager to perform “minor maintenance, and effect minor repairs, to common property” where the service of skilled personnel was not required. Mowing the laws and maintaining the gardens to a high standard, maintaining the pool and its environs and the tennis court are also the manager’s responsibility. The manager must provide at its own expense swimming pool chemicals and equipment, garden fertilizers and accessories and pesticides and motor vehicles to transport garbage and waste bins: cl 6.4.1.
Pursuant to cl 7.2, the manager is obliged to maintain the facilities used by it in providing its caretaking management and letting services including the manager’s office. Importantly, cl 7.3 requires the manger to repair or replace damaged fixtures and fittings and to keep the plant and equipment enumerated in Sch 3 of the management agreement, which is located in the common area, in good working order and condition. However, by cl 7.4 that obligation does not extend to repairing any “[S]tructural Damage, or damage caused by fire storm or flood”.
Clause 10.3 of the management agreement provides that, for the avoidance of doubt, The Alternative Web is responsible for any capital expenditure in respect of upgrading or installing such facilities as electricity, gas, water and any septic tank effluent disposal system. Clause 10.4 makes similar provision with respect to capital expenditure in respect of the preparations of the lots or villas including the upgrade and maintenance of the connecting roadways.
Clause 2.10 of the lease requires the lessee at its own expense to “maintain repair, replace, renovate and keep clean … and from time to time repair … the buildings forming part of the premises”. The lessee is similarly obliged to “keep clean and maintain in good condition and repair all fixtures, fittings, plant, power heads and equipment of both lessor and the lessee”. By cl 2.10.3, the lessee is also required to “replace and upgrade (from time to time)” the power heads and electrical cabling and connections associated with the powered sites. On the other hand, cl 2.10.4 provides that the lessee is not liable for any “structural maintenance, replacement or repair” except where the same is rendered necessary by the acts of the lessee or its agents.
Clause 2.13 requires the lessee at its own expense to “keep all drains, sewers and water channels in or about the demised premises open and free from blockage”. That clause implies an obligation on the part of the lessor to provide and maintain those drains. Pursuant to cl 2.17, the lessee must comply with the requirements of all laws affecting the premises but that obligation does not extend to requiring the lessee to provide or pay for structural alterations or additions. A similar obligation is imposed by cl 2.18 with the health and safety requirements of the premises.
In my view, the terms of the management agreement and the lease with respect to maintenance are broadly consistent. The lessee/manager’s responsibility is to maintain the plant and equipment of the caravan park in an operational state. The obligation of The Alternative Web is to provide the infrastructure necessary for that operation. That infrastructure plainly includes the buildings. In my view it also includes the mains connection for electricity supply and the electrical connections up to the point of the caravan park power heads. It also includes the provision of sewerage pipes and the septic tanks to which they lead.
Because the obligation of the landlord is implied, any obligation on the lessee to carry out any maintenance, repair or replacement precludes the implication of an obligation on the lessor to undertake the same work. However, the absence of an obligation on the part of the lessee to perform any particular work does not necessary imply an obligation on the lessor to do that work. The obligations of a lessor that may be implied are more limited and extend only to the provision of that infrastructure which is contemplated by the lease or necessary to make the leasehold grant effective.[17] With those general observations in mind I turn to the particular claims made by the plaintiffs.
[17] Karaggianis v Malltown Pty Ltd (1979) 21 SASR 381 per Wells J.
The STED system is not expressly referred to by the management agreement or the lease. In my view, the tanks in which the effluent is first stored and treated are of a structural nature and are fixtures without which the caravan park could not effectively operate. If there had been a failure to provide or repair those tanks, there would be little difficulty in implying a term requiring The Alternative Web to provide and maintain those tanks because, in the absence of such an obligation, “the lease would be in danger of failing entirely and its manifest purpose would be frustrated”.[18] However, emptying solid material from the tanks, pumping grey water from the tanks and maintaining, repairing and replacing the pumps are all functions intricately connected to the operation of the caravan park business. The frequency and extent of the work necessary to operate the STED system, and the level of maintenance and repair it requires will depend on the number of residents of the caravan park. There is no express obligation on The Alternative Web either in the management agreement or the lease to perform that work. Nor is there any impediment or difficulty, either practical or financial, in the lessee assuming responsibility for the pumping and pumps of the STED system that necessitates the implication of any obligation on the lessor. There is no obvious reason to imply such an obligation. Indeed, there is a greater analogy between that work and the repair and maintenance obligations expressly conferred on the lessee than there is with work of a “structural” nature which is exempted from the lessee’s obligations.
[18] Karaggianis v Malltown Pty Ltd (1979) 21 SASR 381 per Wells J.
Accordingly, I do not allow any amount claimed by the plaintiffs with respect to the maintenance, repair or replacement of the pumps which operate the STED system. Nor do I allow the plaintiffs’ claims for the costs incurred in engaging a contractor to empty the STED tanks.
For similar reasons, the replacement of taps in the ablution block are the tenant’s obligation pursuant to cl 2.10.1 of the lease. At the very least there is no reason to imply a positive obligation on the part of The Alternative Web to replace that plumbing. The taps are not properly described as “structural”.
The ablution block is situated within the common area marked “A”. The showers, toilets and basins of the ablution block are listed as plant and equipment in Sch 3 of the management agreement and therefore must be kept in good working order and condition by Mr and Mrs Kelly pursuant to cl 7.3.4 of that agreement. An obligation cannot be implied in the lease or the management agreement which is inconsistent with the obligation in cl 7.3.4 of the management agreement. It may be that, as counsel for The Alternative Web submitted, the license to share the common areas granted by the lease was granted on the same covenant as to repair and maintenance applicable to the demised premises. There is some force in that submission but it is not necessary to decide that because The Alternative Web does not in these proceedings bring a claim against Mr and Mrs Kelly on such an implied term. What is of present importance is that there is no reason to imply an obligation on the part of the lessor with respect to the licensed area which is more onerous than his obligation with respect to the demised area. Accordingly, I would disallow the plaintiffs’ claim for the replacement of valves and showerheads in the ablution block in the sum of $480.

I also reject the claim for the replacement of a hot water system in one of the ensuite cabins in the sum of $1,206. The ensuite cabins were in the allotments A205 – A208 and were part of the caravan park leased to Mr and Mrs Kelly. The hot water system is not structural and is therefore part of the building that Mr and Mrs Kelly were obliged to repair.
For similar reasons, I reject the plaintiffs’ claim to reimbursement for the removal and replacement of a faulty swimming pool pump. That pump is “swimming pool equipment” within the terms of cl 6.4.1 of the management agreement.
I accept Mr Kelly’s evidence that he was asked to water the villa sites in 2005 to keep them green even though at that time they remained the responsibility of The Alternative Web pursuant to cl 6.2 of the management agreement. I am not satisfied that the additional costs of watering the villa sites were as great as Mr Kelly claimed. The claim seems excessive on its face and was largely unsupported by the evidence. I would allow this claim in the sum of $300 only.
I accept Mr Kelly’s evidence that he purchased fertilizer to green the grass for the villa sites at Mr Schmidt’s direction and on Mr Schmidt’s promise that he would be reimbursed. I allow the plaintiffs claim in the sum of $525 on this head. I accept Mr Kelly’s evidence on the cost of weeding the villa sites and allow $425 on that head.
Mr Kelly accepted when giving evidence that Mr Schmidt told him that he would not pay for the removal of an old shed and some rubbish located outside of the area leased by Mr Kelly. No clause of the lease or management agreement bound The Alternative Web to remove it. I disallow the plaintiffs’ claim for $650 on this head.
Salt damp repair work carried on in the ablution blocks can properly be described as structural. I would imply a term in both the lease and the management agreement that The Alternative Web was bound to provide and maintain a building that could be reasonably used as an ablution block. I am prepared to infer from all of the circumstances of the relationship of the parties that Mr Kelly only performed that work because it was necessary for the continued use of the building as an ablution block. I therefore allow the sum of $1,650 on that claim.
I turn next to the account from Mr Would for repairs to the ablution block and STED system rendered on 12 April 2009. I accept Mr Kelly’s evidence that some of that work related to the replacement of sewerage pipes and toilet cisterns. In my view the plaintiffs are responsible for the replacement of toilet cisterns and The Alternative Web for the sewerage pipes. However, the account does not separately set out the items of work. Doing the best I can, I would allow a sum of $500 for the replacement of sewerage pipes.
The plaintiffs incurred an expense in the sum of $3,573 for work on gas lines which was necessary to comply with a requirement imposed after an audit by the Office of the Technical Regulator. The work described in the Gas Field Audit dated 27 April 2009 and a LP Gas safety inspection dated 5 May 2009 appears to relate to the plant and equipment of the laundry and the ensuite cabins. The plaintiffs are responsible for the maintenance of that plant and equipment pursuant to the management agreement and the lease respectively. I am not satisfied that the work was of a structural nature. I disallow the plaintiffs’ claim.
The work done by Cain Electrical in December 2008 was on plant and equipment in the kiosk and office, the barbeque area and to the sump pump. In my view the work was in the nature of maintenance and I disallow the plaintiffs’ claim for this expense.
On the other hand the supply of power to the caravan park overhead powerlines is part of the infrastructure which is necessary for the grant of the lease of the land as a caravan park to operate effectively. I would allow the sum of $688.93 paid to Dawe Electrical to install and reconnect earthing wires as required by the Office of the Technical Regulator.
I accept Mr Kelly’s evidence that the sum of $5,000 was inadvertently paid twice for rent to The Alternative Web and detained by it in June 2008. On the other hand, Mr and Mrs Kelly have not paid any amount as to rates and taxes. The sum of $5,000 can be set off against their liability when it is finally ascertained.
The plaintiffs seek reimbursement of the sum of $2,654.20 paid by them by way of legal costs on a warrant of distraint that was issued by The Alternative Web in 2004. Their complaint is that the amount claimed on account of the legal costs of the warrant, and paid by them, was not taxed.
Whatever obstacle the Legal Practitioners Act 1981 presents for the enforcement of claims for legal costs before taxation,[19] the legal costs of the warrant were in fact paid by the plaintiffs to avoid the consequence of the distraint of their goods. The evidence does not disclose enough about the circumstances in which the payment was made to support the restitutionary claim now made by the plaintiffs. I dismiss their claim on this head.
[19] See, generally, 4WD Pty Ltd v McNamara [2009] SASC 274; DA Starke Pty Ltd trading asStarke Lawyers v Yardoo Pty Ltd [2009] SASC 90.
Conclusion
I declare that the plaintiffs’ lease has not been terminated. I dismiss the defendant’s claim that the plaintiffs give up possession. I will hear the parties on the precise orders which should be made and on the final computation of their respective monetary claims.