ReSource Pty Ltd v Shea Investments Pty Ltd
[2024] VCC 1248
•16 August 2024
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-23-00297
| RESOURCE PTY LTD (ACN 615 144 066) | Plaintiff |
| v | |
| SHEA INVESTMENTS PTY LTD (ACN 006 085 427) | Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 15, 16 and 17 May and 29 to 31 July 2024 | |
DATE OF JUDGMENT: | 16 August 2024 | |
CASE MAY BE CITED AS: | ReSource Pty Ltd v Shea Investments Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2024] VCC 1248 | |
REASONS FOR JUDGMENT
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Subject:LANDLORD AND TENANT –
Catchwords: Commercial lease including covenants by tenant to keep property in a reasonably clean and tidy condition ꟷ to keep premises secure and not to construct infrastructure, save with the consent of the landlord having submitted copies of drawings and plans and with necessary “permits and approvals from the relevant authorities” ꟷ notice served under s146 of the Property Law Act 1958 alleging breach of each of these covenants by tenant – whether breach is established – whether observers of any covenants waived – whether notice providing sufficient information for tenant upon expiry of 14-day notice defendant landlord re-entering and terminating the lease – whether re-entry and termination lawful – claim for damages for plaintiff may seize outlays – even if defendant landlord’s determination of the lease lawful according to general law – whether constituting unconscionable conduct contrary to the terms of the Australian Consumer Law – counterclaim by landlord for costs of completing infrastructure work – two breaches of covenant established and unremedied – notice providing sufficient particulars as to those breaches – lease lawfully terminated – no statutory unconscionable conduct in lease determination – defendant landlord’s counterclaim dismissed.
Legislation Cited: Property Law Act 1958; Retail Leases Act 2003; Planning and Environment Act 1987
Cases Cited:Primary RE Limited v Great Southern Property Holdings Limited [2011] VSC 242; Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268; Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305; Crown Melbourne Ltd v Cosmopolitan Hotel (Vic)Pty Ltd [2016] HCA 26; Maritime Electric Company Pty Ltd v General Dairies Ltd [1937] AC 610; Federal Commissioner of Taxation v Wade (1951) 84 CLR 105; Moala v Free Wesleyan United Church of Tonga in Australia (Victoria) Inc [2019] VSC 205; Hurley v McDonald’s Australia Ltd [1999] FCA 1728; Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Shevill v Builders Licensing Board (1982) 149 CLR 620; Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237; GovernorsRugby School v Tannahill [1935] 1 K.B. 87; Tim Barr Pty Ltd v Nauri Gold Coast Pty Ltd [2010] NSWSC 29
Judgment: 1. Within 14 days the parties must bring in short minutes to give effect to these Reasons.
2. Costs reserved.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Baker (15-17 May 2024) Mr P Cadman (29-31 July 2024) | Melbourne Law Studio |
| For the Defendant | Mr T Sowden | M K Steele & Giammario |
HIS HONOUR:
Background
1The property at No 2−12 George Street, Somerton, is constituted by vacant land with an area of 6,376 square metres: that is, between half and three-quarters of a hectare. According to a valuation conducted by a Mr Matt Webb of Urbis Valuations Pty Ltd:
“The property is within an industrial precinct, generally comprising of undeveloped industrial allotments due to the lack of typical services. Further afield the area includes a mix of small, medium and large-scale industrial properties. The largest user in proximity ... included the Linfox Coles Somerton National Distribution Centre, located directly opposite to the subject property at 2-70 Union Road.” (Court Book (“CB”) 461, paragraph 45)
2According to Mr Webb, the property is:
“19 radial kilometres north of the Melbourne Central Business District ... . Specifically, the subject property is situated in a corner position at the intersection of George Street and Union Road.” (Ibid, paragraph 43)
3The allotment, though relatively small, is contained in no less than seven Certificates of Title. (CB 460, paragraph 37)
4Mr Shea is the principal of the defendant Shea Investments Pty Ltd. He is an elderly gentleman resident in Queensland, and of necessity relies, for the purposes of his company’s management of the allotment, on managing agents and personal friends. (Transcript (“T”) X122, Lines (“L”) 9-11) According to Mr Shea, his company has owned this property for approximately 40 years, and until 2023 had leased it only twice: once to Origin Energy for storage purposes on a lease lasting 10 years, and thereafter to the plaintiff, ReSource Pty Ltd. (TX126, 132)
5Mr Troy Rowe is the director of the plaintiff, ReSource Pty Ltd, which, he says, “operates Australia’s largest electronic waste recycling facility. Its premises are at 70 Swann Drive, Derrimut.” (CB 52, paragraph 1; CB 53, paragraph 3.) Mr Rowe said that the Somerton property:
“was an ideal site for a recycling facility as it is zoned Industrial 1, local and interstate transport connections are close and it is some distance away from housing (with the nearest residential land being over 500m away).” (CB 53, paragraph 5)
6Presumably as part of a research project to locate a satisfactory site for a recycling facility, Mr Rowe “took some aerial photos of the Land with a drone around April 2020.” (CB 53, paragraph 5)
7Shea Investments granted a lease to ReSource dated 3 August 2020 in the form of the Law Institute’s “Lease of Real Estate with Guarantee & Indemnity (Commercial Property) (2014)”. The lease identified “landlord’s installations” as being constituted by “Two [2] entry/exit gates to Fenced Vacant Land”. The lease was for a term of six years commencing 1 September 2020. Mr Rowe was shown as a guarantor of the obligations of ReSource Pty Ltd. Rental in the sum of $5,250 plus GST was payable monthly in advance. The permitted use was shown as “storage, battery, e-waste, solar and metals recycling subject to the tenant obtaining any and all permits, approvals and licenses and the tenant complying with such permits and approvals.” A security deposit of $10,500, viz two months’ rent, was to be held as security for ReSource’s obligation but was to be “returned to the tenant upon evidence of at least $200,000.00 being spent by the tenant on property development.” (CB 128-131)
8The lease included extensive special conditions. Special Condition 8 was as follows:
“The Tenant shall at their own expense keep the property in a reasonably clean and tidy condition at all times and free from rubbish and debris. This shall include any hardstand, car parking and garden areas.” (CB 132)
9Special Condition 17 provided:
“The Landlord permits the Tenant to construct buildings and infrastructure, as allowed under appropriate Local Government and other Authority Permits [subject to copies being provided to the Landlord].” (CB 133)
10Special Condition 18 provided:
“The Tenant is required to seek approval and provide the Landlord with copies of drawings and plans relative to any intended property works and upgrades. Prior to commencement of works:
(i) the Tenant must submit plans to the Landlord or managing agent in relation to the proposed works for Landlord’s approval;
(ii) the Tenant must obtain all necessary permits and approvals from relevant authorities;
(iii) the Tenant must obtain Landlord’s written approval and such approval shall not be unreasonably withheld;
(iv) the Tenant must produce policies of insurance (contractors and public liability);
(v) the works must be undertaken by the Tenant solely at the Tenant’s cost and expense and in a proper and workmanlike manner;
...” (CB 133)
11Special Condition 22 provided:
“Provided the Tenant, throughout the term of this lease, pays rent regularly and does not breach and does not fail to comply with the provisions of this lease in a way which is serious or persistent or both, then the Landlord grants to the Tenant the option to buy the leased premises and land for the amount of $3,300,000 (three million three hundred thousand dollars) at the conclusion of the term. The Landlord acknowledges this is the agreed upon amount for the sale and will not attempt to negotiate, abrogate or attempt to increase this amount at any time.” (CB 135)
12There followed detailed provision as to the mode of exercise of the option.
13Mr Rowe said:
“We had a smaller facility based in Sunshine, and we had recently received a large grant from the Victoria Government to substantially expand our operations. Without getting into too much detail, it’s not easy to rent facilities for recycling operations. There are some companies that perhaps don’t do the right thing in these facilities. And so renting an industrial facility, it can be challenging.” (T98, L1−5)
14The property had a frontage to a bitumen road known as Union Road. The intersecting George Street, which also provides a frontage to the land and supplies its address, is not only unsealed but unformed. (T99, L8−14; CB 107) Mr Rowe said his company “leased [the land] for the purpose of constructing a [recycling] facility”. (T101, L29−32) In the event, ReSource did not proceed to construct the facility. Mr Rowe said:
“A short time after entering the Lease I learnt that the Hume City Council intended to perform a number of public works (sewerage and road works) to be funded by a special levy on landowners. The landlord did not want to be liable for those costs and accordingly, ReSource and Shea Investments entered a supplemental deed clarifying that ReSource would be liable for any road making or infrastructure charges being levied during the term of the lease.” (CB 57, paragraph 26)
15This supplementary deed was dated 27 October 2020. (CB 176-183) Mr Rowe continued:
“The Council had (and still has) not charged the levy or commenced any of the proposed works. Consequently, if ReSource was to go ahead and develop the land and build the recycling facility prior to the Council completing the works, ReSource would have to perform and fund the works itself. Given the Council is (as far as I am aware) going to perform the works at some time in the future, I was not willing to bear that expense. Accordingly, around April 2021 I decided instead to use the land as a secure truck and equipment storage site and construct a hardstand.” (CB 57, paragraph 27)
16Mr Rowe said that his investigation as to the cost of these infrastructure works made with civil engineering contractors caused him to recoil with “sticker shock”. (TX27, L13-18) He said he commenced work to establish a hardstand on the property which required the land to be levelled and surfaced with crushed rock “in early 2022”, and that that ReSource had “spent approximately $147,438 dollars ... removing vegetation, spraying weeds on fence line, levelling site and delivering and spreading clay and mudstone to create a hardstand to park trucks.” (CB 57, paragraph 28) Mr Rowe said that he:
“contacted Mr Agatonovic of Love Real Estate in or around April 2021 to tell him that I no longer wished to build the recycling facility and was considering sub-leasing the Land” (CB 58, paragraph 29(a)).
17In April 2021 the land was being managed on behalf of Shea Investments by Love Real Estate by Mr Agatonovic and his superior, Ms McMahon. Ms Lucy McMahon apparently was the Head of Property – Commercial at Love Real Estate. When she became aware that ReSource was seeking a sub-tenant she sent an email to Mr Rowe stating “First list April 2021 with our agency”. (CB 298) Ms McMahon advised Mr Rowe by email 12 January 2023 that:
“all emails you sent to me regarding the hardstand works were passed onto the Landlord.
At the time I was not aware of any dispute or issue regarding the hardstand installation.” (CB 299)
18Mr Shea said:
“I was aware of [ReSource’s] intention to clear and level the land on 3 blocks in Union Road to which I advised I was prepared to consent subject to compliance with Special conditions 17 and 18 of the lease ... including the obtaining and provision to me of Local and other Authority permits relating to the works and copies of drawings and plans being provided prior to the commencement of the works.”
He said none of this was done. (CB 398-399, paragraph 38)
19In 2022 Mr Shea had become dissatisfied with his existing managing agent and appointed the agency Ray White in their stead. Mr Selaci, an agent’s representative at Ray White Thomastown at that time, says he inspected the property:
“I attended the premises in mid 2022 and observed that the fencing was badly damaged, gates had been knocked down and there were large mounds of soil and rock heaped both inside the land and outside what remained of the fencing.” (CB 645, paragraph 8)
20On 15 November 2022, ReSource executed a document styled “Heads of Agreement: Lease” providing for a sub-lease of the property to be granted to a Mr Jason Micallef for a period of three years commencing 16 November 2022 at an annual rent of $110,000. Mr Rowe said he wrote to Mr Selaci of Ray White enclosing a copy of the signed Heads of Agreement. (CB 61, paragraph 39; CB 307) When he attended the property, Mr Selaci found Mr Micallef on site carrying out work. He described Mr Micallef as having taken “possession of the property”, using that phrase in its popular rather than legal sense. (CB 645, paragraph 12) Mr Rowe said that he allowed Mr Micallef to enter the property to carry out preparatory works, but, in the absence of consent from Shea Investments, did not at that stage purport to grant a sub-lease. (TX43, L3-6) A form of sub-lease was prepared, showing Mr Micallef as sub-tenant, but it remained unexecuted. (CB 568-591) In the “additional provisions” section of the Heads of Agreement: Lease Document, Mr Micallef agreed with additional provision 2, “tenant to remove all dirt from around the edge of the property”. Also included as traditional provision 4, was “Tenant to straighten up fencing” (CB 307) A similar provision relative to the removal of “dirt” appears as additional provision 7 in the Unexecuted Sublease (CB 588). Additional provision 2 of the unexecuted Sublease stated:
“It is the Tenant's obligation to ensure that its use of the premises complies with the legal requirements imposed by the Local Municipal Council, the Local Government Act 1989, the Building Act 1993, the Occupational Health & Safety Act 2004, the Metropolitan Fire Brigades Act 1958 and the regulations made there under respectively.” (Ibid)
21Mr Rowe said that during 2022 his contractors had been working to level the property so as to construct a hardstand. The first stage was the removal of vegetation. In August of 2022, with the site rain-sodden, the contractor had advised Mr Rowe to suspend operations until drier weather. As a result, there were no further hardstand works carried out by or on behalf of ReSource after August 2022. Mr Rowe estimated that the project was 80 to 90 per cent complete at that stage. (TX44, L20-26)
22Mr Rowe had warned Mr Micallef that whilst he had allowed him onto the property in November 2022, no lease could be granted at that stage. In a text sent to Mr Micallef on 17 November, he said:
“Remember this is a sub-lease, I don’t officially own the block until 2026, so please allow me some time to get it signed off by the owner. I couldn’t do anything until you did that paperwork so now it’s on me to push the owner. Once the owner is all good, we’ll get the lease.” (CB 337)
23He told Mr Micallef that he (Mr Micallef) could carry out some “prep work”, “but you just won’t have the lease in your hands.” (CB 337)
24On 7 November 2022, Mr Selaci sent an email to Mr Rowe on the subject of consent to the sub-lease. He began, stating:
“The proposed use is inconsistent with and does not fall within the scope of the permitted use described in the lease.”
25He said, however, that consent would be given, subject to production of the proposed sub-lease “and without the landlord bearing any costs in connection with the application for consent and completion of documents”, but also “the tenant [viz ReSource] relinquishing its option to purchase the freehold in the lease and releasing the landlord with respect to any and all claims, costs and expenses in relation to any works carried out at the premises”, and ReSource “confirming that on the expiration or sooner determination of the lease, property in any works carried out by the tenant shall vest in the landlord”.
26Mr Selaci proposed a “short Deed of Variation of Lease” to be executed prior to the execution and commencement of the sub-lease. He also said that prior to commencement of the sub-lease, ReSource should “rectify and reinstate fencing and gates at the property to their original condition as at the commencement of the lease”, and “any and all rubbish [was] to be removed at [ReSource’s] cost and expense prior to commencement of the sub-lease”. (CB 338)
27Mr Rowe agreed that as from the commencement of ReSource’s hardstand works, the gates of the property had been removed to facilitate access for contractors. At no stage during its tenancy did ReSource restore the gates. (TX60, L11-12, X49, L4-14)
28As will be seen, complaints by or on behalf of Shea Investments relative to the state of the fences and the property generally were a continuing theme in 2022. A notice under s146 of the Property Law Act 1958, asserting breaches of covenant by ReSource requiring rectification within 14 days and threatening termination failing rectification and dated 8 February 2022, was served. No action by way of forfeiture was taken based upon this notice. (CB 407) It identified the following alleged breaches of covenant by ReSource:
“(i)You have failed to keep and maintain the premises in a clean and tidy condition free of rubbish and debris.
(ii) You have failed to cut the grass and remove all noxious weeds and maintain the grass at an acceptable level to avoid fire hazards.
(iii) You have failed to reinstate the fencing and gates and secure the premises.
(iv) You have not satisfied clause 4.3 of the Lease in relation to any proposed sub-letting of the premises.
(v) You have failed to provide construction plans for the Landlord's approval and lodge application within a reasonable time with the relevant council for permits and approvals.
(vi) You have failed to obtain permits and approvals and complete works on the land of at least $200,000 and produce to the Landlord invoices and receipts up to the value of $200,000 in respect of the said works within a reasonable time.” (CB 409)
29Counsel for ReSource, Mr Cadman, observed that these alleged breaches did not directly “track” the covenants in the lease. In particular, he noted that whilst the lease, by the special conditions quoted above, contemplated the erection of a recycling facility and the expenditure of not less than $200,000 by the tenant in improving the property, there was no covenant requiring the tenant to undertake those works or expend that money. He noted also that whilst there were restrictions and covenants relative to the grant of sub-leases, such provisions were not engaged unless and until such a sub-lease was granted. As at February 2022 this had not been done or even arguably been done.
30On the evening of 19 December, Mr Selaci sent an email to Mr Rowe stating, inter alia:
“Upon recent drive by inspection we have noticed the fencing around the property is damaged, I will advise the owner of the state of the fencing and get his instructions on this.
Please let me know how this will get rectified.” (CB 344)
31A few minutes later, Mr Rowe responded by email stating:
“Gazment the fences will be rectified by the end of the lease. The current state of the fences has absolutely no impact on the property which has now had over $200k invested in it.
As you can see, we are going through upgrade works on the property slowly as funds allow and until those works are complete, there is no point repairing the fences as we are working up to the boundary. This has been explained several times in the past to the previous 2 agents who also ended up applying common sense logic that it had no impact on the property.” (CB 344)
32According to Mr Selaci:
“When in December [2022] Troy [Rowe] stated that he would not restore the fences to [sic] until the end of the lease because they had no impact on the security of the land, Tom [Shea] gave instructions to serve a notice of breach.” (CB 646, paragraph 13]
33Solicitors M K Steele & Giammario sent a letter dated 19 December 2022 to Melbourne Law Studio, the law firm acting for ReSource, via email. This letter alleged, inter alia:
“Your client has:
1.Failed to keep the premises clean and free from rubbish and debris - a breach of Clause 3.2.2 and Special Condition 8;
2.Failed to secure the premises allowing fences and gates to remain in a state of disrepair – a breach of Clause 3.2.13;
3.Effected infrastructure works to the subject property including but not limited to the installation of a hardstand without the landlord’s approval and/or relevant council permits and approvals in breach of Special Condition 18.
Accordingly the suggestion that the tenant has complied with Clause 4.3.3 is in dispute.” (CB 284)
34The letter stated that no consent to sub-lease would be given before rectification of the alleged breaches. (CB 284-5)
35On 21 December 2022 a further notice under s146 of the Property Law Act 1958 was served on ReSource by Shea Investments’ solicitors. (CB 54, paragraph 7; CB 148-151) Paragraph 1 of the notice referred to some four covenants in the lease. Paragraph 2 alleged breaches of those covenants in the following terms:
“The abovementioned covenants have been breached and in particular the breaches complained of are as follows:
(i) You have failed to keep and maintain the premises in a clean and tidy condition free of rubbish and debris.
(ii) You have failed to reinstate the fencing and gates and secure the premises.
(iii) You have undertaken works to the subject property including but not limited to the installation of a hardstand without the landlord’s approval and/or relevant council permits and approvals.
(iv) You have proposed to sub lease the land whilst in breach of the lease and proposed to assign your responsibility for rectification of the breaches 2(i) and 2(ii) to a sub tenant notwithstanding that no sub lease has been approved by the landlord.
(v) Notice of the breaches was served by letter dated 19 December 2022 from the Landlord’s solicitor.
(vi) On 20 December 2022 you advised the landlord’s agent in writing that you had no intention of rectifying one or more of the breaches until the end of the lease.” (CB 149-150)
Paragraph 3 required ReSource to take the following action:
“ i) within 14 days of service of this notice you must:
(a) reinstate the fence and gates to the same condition existing as at the commencement date of the Lease;
(b) take all necessary steps to secure the premises;
(c) remove all rubbish and debris from the premises;
(d) remove all infrastructure works you have effected upon the property and return the property to the same condition existing as at the commencement date of the Lease;
(e)to refrain from taking any further action to sub-let the premises until the breaches have been rectified and the Landlord’s written consent obtained and subject to complying with the requirements set out in clause 4 of the Lease;
(f)attend to payment of legal costs associated with preparation and service of this notice, a sum of $990.00;” (CB 151)
36For the purposes of this proceeding, Shea Investments no longer relies upon the alleged breach of covenant referred to in paragraph (iv). M K Steele & Giammario followed up the breach notice with a letter dated 11 January 2023 to ReSource’s solicitors. Referring to the notice of breach, they said:
“We are instructed that the tenant has failed to remedy the breaches set out in the default notice and accordingly the lease is at an end and our client has re entered the property.” (CB 153)
37Following Shea Investment’s re-entry and cancellation or purported cancellation or ReSource’s lease, it re-entered a further lease once again in the Law Institute standard form, with “Jason Ray Micallef” as tenant on 4 May 2023 (CB 592-617). This lease included some twenty additional provisions (CB 615-616), including requirements for the construction or completion of hardstand works and in particular additional provision 8:
“The Tenant shall remove all mounds of dirt from around the edge of the premises outside the fencing.” (CB 615)
An enterprise known as “Northern HQ Storage”, which gave its address as “2-12 George Street, Somerton”, viz. a subject premises, rendered a document-styled “invoice” to Shea Investments, dated 13 February 2023. While the document is described as an “invoice” and therefore one would suppose the works for which it describes and for which it seeks payment have been completed, a number of narrations suggest that it is more in the nature of a “quotation”. The work referred to is generally what would be required to complete the conversion of the premises to a hardstand, as contemplated by ReSource and Mr Rowe. In contrast to Mr Rowe’s project, however, the invoice refers to 2,000 tonnes of “recycled asphalt profiling’s” at a cost of $20,000. A charge of $27,500 is made for “fence installation”, with the narration “Price represents total cost of perimeter chainlink fence to be installed including materials and labour [my emphasis] (CB 556). Mr Shea said that this work had been completed and the stated cost, $104,720, had been allowed as an offset against Mr Micallef’s rental obligation. He said, once this credit was exhausted Mr Micallef ceased paying rent and his lease was terminated. Shea investments then let the premises to Melbourne Premier Bus Lines Pty Ltd pursuant to a lease dated 4 August 2023, once again, in the Law Institute standard form, for a period of five years, commencing 7 August 2023. The additional provisions (seventeen in number) included the following:
“The Tenant acknowledges that the previous lease between the Landlord and ReSource Pty Ltd has been terminated by the Landlord dated 3 August 2020 (‘the previous lease’) by Notice of Default dated 21 December 2022 with respect to the premises. The Tenant acknowledges that ReSource Pty Ltd disputes that the previous lease Is at an end and has applied to the court for relief against forfeiture of the previous lease in County Court action CI-23-00297 (‘the proceeding’). In the event that the proceeding is determined by Order or terms of settlement or howsoever otherwise to the effect that the previous lease remains on foot, then it is agreed that this lease shall be terminated forthwith by agreement and the parties hereto shall sign all documents, instruments and notices and do all such acts and things reasonably necessary to give effect to the agreement herein. Each party releases and discharges the other and each of the party's directors from all present and future claims, expenses and losses arising relating to or connected with this lease or the leased premises.” (CB 642-643)
This proceeding
38Solicitors acting for ReSource filed an originating motion dated 25 January 2023 commencing this proceeding, seeking declarations to the effect that the termination or purported termination of the lease by Shea Investments was invalid and that the lease continued to subsist; alternatively, relief against forfeiture and consequential relief (CB 5-6).
39A summons filed pursuant to the originating motion brought this matter on for hearing before Judge Burchell on 9 February 2023. For reasons which she gave orally on that day, her Honour declined to grant the relief sought by ReSource. She gave directions to set the matter down for trial.
40In due course, after some “false starts”, the proceeding came on for trial before me on 15 May this year and proceeded the following day. On the third day of trial, namely 17 May, ReSource’s then-counsel, Mr Baker, announced “I’m afraid a matter has arisen whereby I can no longer act in this proceeding” (T123, L3-4). Mr Baker said that he had obtained advice by way of resolution from the Bar Ethics Committee (ibid, L25), concluding: “I am required to return the brief.” (Ibid, L27) Consequently the matter was adjourned to enable ReSource to retain alternative counsel. I had a number of forthcoming commitments, including a spell as duty judge in the commercial division and a civil circuit sitting in Wodonga. Consequently, the earliest date which could be fixed for the resumption was 29 July 2024. On the resumption, ReSource was represented by new counsel, Mr Cadman.
41For reasons not disclosed when the trial resumed on 29 July, no continuing arrangement had been made for the taking of a transcript. Despite a number of question from me, the trial concluded, including closing submissions, before the audio for this latter part of the trial on 29, 30 and 31 July was delivered to a transcriber. The transcript of this portion of the trial did not become available until 14 August. The second tranche of transcript commenced its pagination at page 1, rather than being integrated into the pagination from the earlier portion. References to the second tranche of transcript are preceded by the letter “X”.
42Judge Burchell ordered that the matter proceed “as if commenced by writ”, giving directions for the filing of pleadings.
Statement of claim
43By its statement of claim dated 17 March 2023, ReSource Pty Ltd, alleged incorporation of the parties and their execution of the lease dated August 2020 with respect to the subject property, alleged a series of covenants contained in the lease instrument together with the supplemental deed obliging ReSource to pay any road construction or infrastructure costs.
44Next, the statement of claim alleged service on ReSource by Shea Investments of the notice of default under s146 of the Property Law Act and the breaches of covenant alleged therein and the remedial action which the notice required ReSource to take within 14 days. It said:
“On or about 20 January 2023, [Shea Investments] purported to re‑enter the Premises and forfeit the Lease as Varied.”
45As to the breach of covenant alleged in cl 2(i) of the default notice, which it described as “the Maintenance Breach”, ReSource said it was “hopelessly devoid of particularity”. Therefore, that breach was “invalid and not capable of providing a basis to issue the Notice, forfeit the Lease as Varied and re‑enter the Premises”.
46If that were wrong, it said that at the time of service of the notice the premises were “clean and free from rubbish and debris in accordance with cl 3.2.2 and Special Condition 8.” In any event, it said that the alleged breach was “trivial, capable of immediate rectification and [caused] negligible (if any) prejudice to [Shea Investments].”
47As to the second breach alleged, namely the one in cl 2(ii) of the notice, described as “the Fencing Breach”, it was said that this was likewise “hopelessly devoid of particularity” and “it is not possible for [ReSource] to understand with the necessary certainty what it is required to remedy”. In any event, it said, what was alleged did not constitute a breach of the lease. No covenant required the premises to be fenced, it said, and “Properly construed, cl 3.2.13 [of the lease] requires that [ReSource] take reasonable precautions to secure the premises and its contents from theft. There is no evidence of theft from the Premises. Further, the Premises are properly secured as it is under 24-hour video surveillance.” In any event, if there were such a breach, it said, it was “trivial, capable of immediate rectification by installation of temporary fencing to enclose any opening of the fencing, and [caused] negligible (if any) prejudice to [Shea Investments].”
48As regards the breach alleged in cl 2(iii) of the notice, described as “the Works Breach”, it was said that the covenant recited in paragraph 1 of the notice, and referring to the need for local government and other authority permits for constructions and infrastructure and the need for landlord consent, referred to clauses 17 and 18 of the lease, which, it was said, concerned “the applicability of GST and rent review”; therefore, the allegation of this breach was “invalid and not capable of providing a basis to issue the Notice, forfeit the Lease as varied and re‑enter the Premises”.
49In any event, according to the statement of claim, Mr Rowe, on behalf of ReSource, contacted Shea Investments’ then managing agent in March 2021 “and told him that [ReSource] would construct a truck hardstand and wanted to sublease the Premises for truck parking.” Shea Investments’ managing agents advertised the premises for sub-lease, and between April 2021 and May 2022 “there was correspondence between [ReSource] and [Shea Investments] concerning the Hardstand Works and Parking Use” (referring to eight items of correspondence), with the hardstand works beginning “in or about February 2022”. Therefore, according to the statement of claim, “at least since March 2021, [Shea Investments] knew or ought to have known that [ReSource] was constructing a hardstand on the Premises for use as truck parking.” At no time after becoming aware of these things, it was said, did Shea Investments seek to stop the hardstand works or “communicate objection to the Parking Use”. Thereupon, according to the statement of claim, ReSource had spent “approximately $160,000 inclusive of GST on the Hardstand Works”.
50Then, on 5 January 2023, Hume City Council “advised [ReSource] that planning permission was required to construct a hardstand on the Premises.” Until that date, it was said, neither company knew that planning permission was required for the hardstand works or the parking use. ReSource, it was said, was “ready, willing and able to apply for the necessary planning permission to obtain planning permission for the Hardstand Works and Parking Use”. In any event, it was said, the lease permitted the hardstand works and the parking use; therefore, in so far as the notice relied on the Works Breach, it was “invalid and not capable of providing a basis to issue the Notice, forfeit the Lease as Varied and re‑enter the Premises.”
51Even if the lease did not permit the works and the use, it was said that Shea Investments had consented to these, and ReSource had carried out the works “with the full knowledge and acquiescence of [Shea Investments]”, and Shea Investments “waived strict compliance with Special Conditions 17 to 19 of the Lease as Varied”. It said that Shea Investments had “reasonably caused [ReSource] to believe and conduct its affairs as if [Shea Investments] did not intend to take any action against [ReSource] over the Hardstand Works and Parking Use”, and therefore ReSource had acted to its prejudice and had suffered detriment, whilst Shea Investments was “guilty of prolonged, inordinate and inexcusable delay in issuing the Notice and alleging the Works Breach and has accordingly been guilty of laches.” By reason of these matters, it was said, Shea Investments was “not entitled to and [was] estopped from asserting the Works Breach as a basis for the Notice.”
52In any event, if Shea Investments were entitled to rely on the Works Breach as a basis to issue the notice, and if it were proven, it did not provide a basis to terminate the lease, because “The Works Breach was innocent and not intentional and premised upon a misapprehension that was shared by [ReSource and Shea Investments]. [Shea Investments] has not suffered any prejudice as [it] is permitting the Premises to be used for truck parking.”
53ReSource sought relief against forfeiture.
54As regards the alleged breach relative to entry into a sub-lease, ReSource said it had “not at any material time entered or purported to enter a sublease with a sublessee”; therefore, the alleged Sublease Breach was “invalid”.
55Therefore, it was said, the notice as a whole was invalid, as was the purported re‑entry, and it was inequitable for Shea Investments to forfeit the lease. Therefore, said the statement of claim, ReSource was “entitled to the exclusive possession of the Premises until 1 September 2026”.
56It was also said, by reason of the various matters alleged, “by issuing the Notice and alleging the Works Breach and seeking strict compliance with Special Conditions 17 to 19, [Shea Investments had] engaged in conduct in connection with the provision of goods and services that is in all the circumstances unconscionable and contrary to s 21 of the Australian Consumer Law, being schedule 2 to the Competition and Consumer Act 2010 (Cth).”
57The statement of claim also sought damages by reference to the amounts outlaid on completing the hardstand works, and also for the “loss of the opportunity to exercise the Option to Purchase the Premises at the end of the term of the Lease as Varied”.
58ReSource sought a declaration that the s146 notice was “invalid” and a further declaration that it was “entitled to exclusive possession” of the Property. It sought an order that Shea Investments “forthwith take all steps as are necessary to give [ReSource] exclusive possession of the Premises” or alternatively damages, costs or further or other relief.
59The statement of claim also sought relief against forfeiture, but this relief was not pressed at trial.
Defence and counterclaim
60By its defence and counterclaim, after admitting formal matters such as incorporation, the identity of the property as comprised in various certificates of title, and the standing of Love Real Estate as Shea Investments’ agent, Shea Investments admitted the notice of default and its service, but said that “the description of the breaches in the default notice [were] unambiguous having regard to the language used in the default notice to [ReSource’s] actual or constructive knowledge such as to put [ReSource] on notice of what was required to remedy the breaches.” It said there was no obligation upon Shea Investments to include evidence of breach with the default notice.
61Next, it was said that “having regard to the nature of the property (which was vacant land), the nature of the breach (which involved a failure to remove soil which had been dumped along the boundaries of the premises) and written acknowledgments made by [ReSource] of what was required to carry out remedial works, [ReSource] had actual and/or constructive knowledge of the breach.” By way of particulars, it referred to the heads of agreement entered into with Mr Micallef requiring the removal of “all dirt from around the edge of the property”, and the draft sub-lease.
62It said that illegal dumping of soil was evident in photographs taken by a Mr Mikakis on 11 January 2023.
63As to the “Maintenance Breach”, Shea Investments said if it was “trivial and capable of immediate rectification [ReSource] had failed to take any or any reasonable steps to rectify the breach notwithstanding that it had been put on notice of the same breach under an earlier notice of default”.
64As to what was described in the statement of claim as the “Fencing Breach”, it said that “[ReSource] had actual and/or constructive knowledge of both the breach and what was required to remedy it.” It referred to correspondence by way of emails dated 12 April 2022 and 3 May 2022. Therefore, it denied that the Fencing Breach was “invalid”.
65It said that cl 3.13 “required [ReSource] to secure the premises”, and cl 3.1.1 required the premises to be kept in the same condition “as at the start of the lease (fair wear and tear excepted)”, and cl 3.2.9 of the lease required ReSource “to carry out repairs within 14 days of being served with a written notice of any defect or lack of repair”.
66As to the references to clauses 17 and 18 relative to what the statement of claim described as “the Works Breach”, it said the references in the notice to those clauses were “references to the special conditions of the lease”.
67Shea Investments generally denied the attacks upon the form and substance of its notice under s146 of the Property Law Act.
68It said that it had irrevocably changed its position such that it would be inequitable to grant ReSource relief against forfeiture. It denied that it had been unjustly enriched by the hardstand works carried out by ReSource. The hardstand works, it said, were undertaken by ReSource “on the expectation of subleasing the premises” in circumstances where Shea Investments was not obliged to consent and “no formal request for [Shea Investments’] consent to a sublease was ever made”.
69By way of counterclaim, Shea Investments referred to a series of terms of the lease. It then repeated allegations of breach to similar effect to the allegations in the s146 notice, though there was no allegation of breach with respect to any alleged sub-lease. It said by reason of these breaches, Shea Investments had incurred expenses in the sum of $104,720 “in carrying out repairs to the fence and installing gates, removing unsuitable fill (used by [ReSource] to partially construct a hardstand) and soil that had been dumped on the premises”. It referred to an invoice dated 13 February 2023 from “Northern HQ Storage”. By way of counterclaim Shea Investments sought $104,720; alternatively damages, interest and costs.
Reply and defence to counterclaim
70By its reply and defence to counterclaim dated 1 May 2023, apart from joining issue on Shea Investments’ defence, ReSource referred to an earlier notice under s146 of the Property Law Act dated 8 February 2022 and contended that by reason of matters alleged in the statement of claim Shea Investments had “waived strict compliance with clause 2.2.1 of the Lease ...”. Finally, it said that if Shea Investments had granted a lease to Mr Micallef, this was against the background of circumstances where it had withheld consent to ReSource’s proposal to lease the premises to Mr Micallef and offered to consent only upon the abandonment of ReSource’s option to purchase. In granting any such lease to Mr Micallef, Shea Investments, it was said, knew that ReSource “disputed the validity of [the] Notice as a basis to re-enter ...”. It raised no change-of-position defence at the hearing on 9 February 2023, and Mr Micallef knew that ReSource denied the validity of the Notice. Therefore, it was said, Shea Investments had engaged in unconscionable conduct contrary to s21 of the Australian Consumer Law.
71As to the counterclaim, ReSource denied the allegation.
Conclusions
The s146 notice
72Section 146 of the Property Law Act 1958 provides, inter alia, as follow:
“146 Restrictions and relief against forfeiture of leases and under-leases
(1)A right of re-entry or forfeiture under any proviso or stipulation in a lease or otherwise arising by operation of law for a breach of any covenant or condition in the lease, including a breach amounting to repudiation, shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice—
(a)specifying the particular breach complained of; and
(b)if the breach is capable of remedy, requiring the lessee to remedy the breach; and
(c)in any case, requiring the lessee to make compensation in money for the breach—
and the lessee fails, within a reasonable time thereafter, or the time not being less than fourteen days fixed by the lease 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.
This subsection shall not extend to a breach of any covenant or condition whereby or by means whereof either alone or with other circumstances any licence or permit under the Liquor Control Reform Act 1998 is or may be endangered or is or may be liable to expire or be forfeited, surrendered, taken away or refused.
(1A)A notice served under subsection (1) in respect of a breach amounting to repudiation—
(a)does not constitute, and must not be taken to constitute, an affirmation of the lease by the lessor; and
(b)does not affect any right that the lessor may have by reason of the repudiation.
(2)Where a lessor is proceeding, by action or otherwise, to enforce or has enforced without the aid of the Court or the County Court such a right of re-entry or forfeiture, the lessee may apply to the Court for relief; and the Court may grant or refuse relief, as the Court, having regard to the proceedings and conduct of the parties under the foregoing provisions of this section, and to all the other circumstances thinks fit; and in case of relief may grant it on such terms (if any) as to costs, expenses, damages, compensation, penalty or otherwise, including the granting of an injunction to restrain any like breach in the future, as the Court, in the circumstances of each case, thinks fit.
...
(12)This section shall not, save as otherwise mentioned, affect the law relating to re-entry or forfeiture or relief in case of nonpayment of rent whether or not such a breach amounts to repudiation.
(13)This section shall have effect notwithstanding any stipulation to the contrary but subsections (3) and (4) are to be read subject to the provisions of Part 10 of the Retail Leases Act 2003.”
73The effect of the section is that as to breaches of covenant other than non-payment of rent, no right of re‑entry or forfeiture may be enforced by a landlord without its first having served a notice under the terms of the section requiring rectification or the payment of compensation within a reasonable time, not being less than fourteen days, and the lessee fails within that time to rectify the default or pay compensation as the case may be. The section includes a number of exceptions to this general principle which are irrelevant to the present dispute.
74In attacking the validity of the s146 notice, Mr Cadman, who appeared on behalf of ReSource following Mr Baker’s withdrawal, relied on paragraph [105] of the judgment of Judd J in Primary RE Limited v Great Southern Property Holdings Limited [2011] VSC 242. In that paragraph, his Honour referred to and adopted an analysis by Hodgson JA on the subject relative to the New South Wales equivalent of s146 in his judgment in Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268, paragraphs [307]-[324], where Hodgson JA quoted extensively from the legislative history of these provisions in England and Australia and from numerous judgments from both countries. As I understood the purport of Mr Cadman’s contentions, the crucial passage for the purposes of his case appeared at [323] of the judgment of Hodgson JA in the Macquarie case, where, speaking of the New South Wales equivalent of s146, his Honour said:
“[323]In my opinion, the above authorities clearly indicate that a notice under s 129 must not only allege breach, but must also describe the particular acts or omissions constituting the alleged breach; and the notice must indicate the acts of the tenant which the landlord would consider sufficient for the lease to continue, and upon completion of which the landlord would abandon its claim to forfeit. The standard of particulars or degree of specificity depends upon the circumstances, including the nature of the covenant alleged to be breached, the tenant’s actual or constructive knowledge, and whether the landlord claims reasonable compensation. ... Thus s 129 is, in my opinion, directed at allowing the tenant to bring about (within a reasonable time) a state of affairs under which the landlord would not pursue forfeiture.”
75Also of key significance to the case advanced by Mr Cadman is the following paragraph, [324], in the Macquarie case:
“[324]In particular, the lessee should not be left to speculate as to whether, if it took whatever action it could to remedy the specified breaches, the lessor might nevertheless proceed to terminate the lease on the basis that the breaches were not capable of remedy or that, because what the lessee did was insufficient to eliminate loss caused to the lessor by the late performance of the lessee’s obligations, the lessee was still in breach.”
76As a green articled clerk almost 50 years ago, I found my first piece of legal drafting rejected by my principal. He said that as far as possible in drafting a notice under a statutory provision or a contractual term, one should employ the very words of the statute, regulation, or contractual term, and not employ paraphrases or synonyms. Employment in a notice under a statute or a contract of any words other than the words used in the statute or contract may create uncertainty, doubt, or ground for argumentation, especially for those who accept the proposition that there are no true synonyms in the English language.
77It is not the case that failure to “track” the language, for instance, of a lease in a notice given under its terms necessarily invalidates the notice. However it does raise grounds for argument, however.
78Paragraph 2 of the notice includes six subparagraphs. One of those, (v), merely recites the giving of a demand by way of solicitor’s letter, another refers to ReSource’s response to that letter; (iv), relating to subleasing, has been abandoned. This leaves some three alleged breaches for consideration, both as to whether these breaches were committed in the first place and persisted after service of the notice, and also whether, in accordance with the principle stated by Judd J and Hodgson JA in the authorities referred to, they have been adequately described in the notice.
Maintenance Breach
79Paragraph (i) states:
“You have failed to keep and maintain the premises in a clean and tidy condition free of rubbish and debris.”
80This alleged breach must be seen in the context of paragraph 1(a) of the notice, which alleges that ReSource had covenanted “to keep the premises properly cleaned and free from rubbish and debris (clause 3.2.2) and Special Condition 8”. (CB 149-150) The first of those provisions appears in the lease as part of cl 3, which is headed “Repairs, Maintenance, Fire Prevention and Requirements of Authorities”. Clause 3.2 provides, inter alia:
“3.2In addition to its obligations under clause 3.1, the tenant must -
...
3.2.2keep the premises properly cleaned and free from rubbish, keep waste in proper containers and have it removed regularly.” (CB 117)
81Special Condition 8 provides as follows:
“8. The Tenant shall at their own expense keep the property in a reasonably clean and tidy condition at all times and free from rubbish and debris. This shall include any hardstand, car parking and garden areas.” (CB 132)
82The special conditions described in the lease as “Additional Provisions” by force of cl 21 of the general (printed) provisions of the lease are said at 21.1 to “bind the parties” and at 21.2 “if inconsistent with any other provisions of this lease, override them.” (CB 127) It has not been contended that there are any inconsistencies between Special Condition 8 or any other special condition and the printed provisions of the lease which would require resort to this provision as to resolving inconsistency. (CB 127) The alleged breach therefore represents a combination of the general printed conditions (cl 3.2.2) and Special Condition 8 and does not directly track either of them. Mr Cadman noted that printed condition 3.2.2 makes no reference to “debris”, though he conceded that Special Condition 8 did. The notice, however, in its introductory section, paragraph 1, directs attention to both provisions.
83The mode of draftsmanship is, for reasons explained, sub-optimal. It would have been preferable to allege breach directly in the terms of both provisions, and provide a heading “Particulars” which would describe the specific state of affairs or phenomenon said to constitute the breach.
84As referred to in the notice, it was preceded by a letter of demand from Shea Investments’ solicitors dated 19 December 2022. For the moment I need not stay to consider whether reference in cl 2 of the notice to this letter incorporates it by reference or whether what is said in the letter should be regarded as part of ReSource’s actual or constructive notice for the purposes of the formulation of the rules as to validity quoted from the judgment of Hodgson JA in the Macquarie case. The letter of 19 December 2022 (CB 284-285) does not elaborate on how it was contended that ReSource had failed to keep the premises “clean and free from rubbish and debris”.
85The evidence before me, however, disclosed that the gravamen of Shea Investments’ complaints was “mounds of dirt” to be found on the premises. A variety of photographs illustrate mounds of dirt; for instance, CB 439. This photograph, however, was taken in August 2022, and the mound depicted is outside the premises on the surface of the unformed and unsealed George Street. Photographs at CB 444 and 445 show a very unsightly bank of soil threatening to knock over the wire fence. These photographs were taken in May 2022, not at or around the time of the notice. Two photographs were added to the Court Book as pages 172A and 172B. These photographs are aerial. They are suggestive of mounds of soil, and are said to have been taken on 11 January 2023. (T106-107)
86Shea Investments’ solicitor wrote to ReSource’s solicitor by letter dated 23 January 2023, enclosing photographs said to demonstrate “the unsatisfactory state of the property”. The photographs, at CB 158-159, clearly depict piles of soil, rock, fallen fencing material and so forth. Asked by Mr Baker about these photographs – in particular the photograph at page 158 – Mr Rowe said that this depicted the north-east entry to the property, with Union Road in the foreground. (T107, L23-40) Asked if this was a depiction of the land as it was “around about – or early 2023”, Mr Rowe said, “No. No. Definitely not”. (T108, L13) Mr Rowe said fencing had been dismantled and was piled on the path. On his inspection, presumably sometime in January 2023, “there was only a two to three metre opening”. I asked how he came about the pile of dirt and he conceded it was there presumably in “January 2023” (Ibid, L8-30). In cross-examination, Mr Rowe said that, in carrying out his hardstand, Mr Micallef had piled soil around the boundaries of the land.
87Further, Mr Sowden noted that, in the “Heads of Agreement: Lease”, dated 15 November 2022, additional provision 2 stated, “Tenant [viz. Mc Micallef] to remove all dirt from the edge of the property” (CB 307). He noted, also, that the unexecuted Micallef sublease, presumably prepared at the direction of ReSource, required additional provision 7, “The tenant shall remove all dirt from around the edge of the property” (CB 334). On the basis of this evidence, I conclude that there were piles of soil on the property before the service of the s146 Notice and that they remained at the expiration of the fourteen-day period referred to therein. This is plainly at odds with an obligation to keep the property “reasonably clean” and in a “tidy condition” at all times (CB 207). It is open to question in my view whether the mounds of soil could be regarded as “rubbish”, for which printed condition 3.2.2 requires the premises to be kept free. Ultimately however I conclude that this was not a proper basis for Shea Investment’s re-entry and determination of the lease, because neither the Notice itself, nor the letter of 19 December even it is to be regarded as incorporated by reference in the Notice, specifically identified the mounds of soil as the Letter of Complaint. To this extent, the Notice fell short of satisfying the requirements of a valid notice, as explained by Hodgson JA in the Macquarie case, which principles were adopted by Judd J in Primary RE Limited.
88In the circumstances, as regards this breach, it is unnecessary to consider a further argument advanced by Mr Cadman that the printed covenant and the additional provision would have to yield or be regarded as subject to a provisor if, as he contended, Shea Investments must be regarded as having consented to the carrying out of hardstand work.
Fencing Breach
89I turn next to consider the breach alleged in clause 2(ii) of the Notice, which alleges: “You have failed to reinstate the fencing and gates and secure the premises” (CB 150). This alleged breach was said to have been made in circumstances where, according to paragraph 1 of the Notice, ReSource had covenanted (b) to take reasonable precautions to secure the premises (clause 3.2.13). This includes the landlord’s installations, including fence and gates (CB 149-150). Clause 3.2.13 provides as follows:
“3.2 In addition to its obligations under clause 3.1, the tenant must -
…
3.2.13take reasonable precautions to secure the premises and their contents from theft, keep all doors and windows locked when the premises are not in use and comply with the landlord’s directions for use and return of keys and keycards.” (CB 192)
90This is a printed “boilerplate” provision. As previously noted, the form of lease is published by the Law Institute for use in commercial premises. Retail premises are subject to specific controls and mandatory procedural requirements under the Retail Leases Act 2003. Therefore, it may be inferred that the principal concern for this standard form and the circumstances in which it is drafted, conceive it would be used for factories, warehouses and offices from which retail services are not provided to consumers. In the case of a piece of vacant land, aside perhaps from the fencing, there is nothing which can be stolen. There may be keys or keycards, but there are no doors or windows to be locked. Mr Rowe conceded that, when he commenced carrying out hardstand work, he removed the gates to the premises (TX58, L14-21). Further, various photographs show damage to the wire fence and holes therein.
91Mr Shea said that the previous occupier of the premises, Origin Energy, during a ten-year occupancy, maintained the premises in good order, with secure fencing. Mr Shea said, “Security of the land was a major priority for me as I held grave concerns to avoid the land being subjected to illegal dumping” (CB 394, paragraph [6(f)]). He said that he and his wife had suffered an $80,000 liability by reason of illegal dumping and processing of waste on another property in the vicinity of 21 King Street, Somerton as a result of defaults by the tenant of that property. Mr Shea said he was reassured by ReSource (presumably by Mr Rowe) that the property would be kept secure and the reprocessing facility would proceed with the assistance of a $1.5 million grant from the Victorian government (CB 394, paragraph [6]).
92Mr Rowe said that the terms of the government grant required it to be spent on equipment. It would have been unlawful to spend the money on improvements to the land (TX29, L21-22). Mr Rowe said that:
“… there was an incident in late January 2021 [sic, scil. 2022] or early February 2022, where an unknown person knocked over a section of the fence with a heavy vehicle and dumped cement waste on the Land. I learnt about this when I received an email on 2 February 2022 from Branko Agatanovic of Love Real Estate (the landlord’s real estate agent) to tell me that damage had occurred along a 30m section of the fence along the George Street boundary … .”. (CB 56, paragraph [20])
93Mr Rowe said he reported the damage to Victoria Police on 4 February 2022 and “fixed the damaged portion of the fence on 8 February 2022” (Ibid, paragraph [21]).
94In or around June 2022, he installed video surveillance (Ibid, paragraph [22]. He said these cameras were located at opposite corners of the land and maintained the entire allotment under surveillance. Any intrusion resulted in an SMS message to his mobile phone (TX17, L4-7). There was no evidence as to whether these cameras were mounted conspicuously so as to constitute a deterrent to trespasser. Mr Rowe said that, to the best of his knowledge, there had been no trespass or intrusions since the installation of the cameras.
95The first question which arises is whether, upon the evidence, a breach of the relevant covenant has been established. The contention for ReSource is that the installation of the cameras constituted compliance with the relevant covenant, both because the use of the “app” on Mr Rowe’s mobile phone would give warning of an incursion and the existence of the cameras, constituted in itself a deterrent to would-be trespassers or dumpers. In closing submissions, there was debate and reference to various meaning ascribed to the verb “secure” by the Oxford English Dictionary. Mr Sowden on behalf of Shea Investments, urged me to adopt a meaning he said came from the Oxford English Dictionary of the meaning “secure” viz. “to fix or fasten” (T78, L1-3). If that be the appropriate meaning, the installation of surveillance cameras could scarcely be regarded as some process of fastening. In closing submissions, Mr Cadman on behalf of ReSource, said the Oxford English Dictionary described no less than twenty-eight meanings to the verb “to secure” and the one advocated by Mr Sowden was scarcely the most appropriate in the context of the lease (TX291, L10-14). According to the online addition of the Oxford English Dictionary as at 1 August 2024, the first and presumably primary meaning for the verb “to secure” is “to keep safe from danger, harm, or loss; to ensure the safety of; to protect”. Formerly, chiefly with a person, a person’s life, etc., as object; now more usually with a (valuable) item as object. The seventh meaning given by the dictionary is “to fence off; to enclose by or with a barrier”.
96As the High Court has said more than once over recent decades, commercial agreements (which would include this commercial lease) need to be given a businesslike meaning, having regard to the facts and circumstances within the joint knowledge and contemplation of the parties. As previously noted, this covenant is a “boilerplate” clause and framed, one might think, by the drafters of the standard form, principally with offices, factories and warehouses in mind. With the recycling facility contemplated by Mr Rowe and his company. In fact, being director, the company could be regarded as applying precisely in that obvious manner to these premises. Whilst the land remained vacant however, it must be regarded as having a different aspect. In those circumstances, the meaning “to fence off, to enclose by or with a barrier” is the obvious one. Illegal dumping is a notorious problem in areas such as Somerton. Considering what might be regarded as “businesslike” in a wider sense, a covenant to “secure” premises in the broad general terms as this one is would not be construed as requiring leased premises to be held in perpetual lockdown like a fortress. This is a lease adapted for commercial premises. The premises must be open at least during business hours to allow persons involved in the conduct of the relevant commercial enterprise on the demised property to come and go as required by the means of the enterprise. The “securing” would presumably be regarded as required only when the premises are not “open for business” and are unattended. To put it another way, a covenant such as this would not be apt to oblige a tenant to introduce “airport-style security” whenever the premises were open for business. An obligation to do such a thing would require a far more specific covenant.
97In this instance, Mr Rowe had the gates which, in their original state, could have been locked to “enclose” the land or perhaps to complete the enclosure removed, leaving the entrances open and unobstructed twenty-four hours a day. As previously noted, in Mr Rowe’s view, this was to facilitate the conduct of the hardstand work. To have premises such as this completely enclosed by fences and gates whilst they are unattended, with the gates open whilst works are being conducted, would be entirely consistent within the meaning which I have suggested as to the covenant, such that gates or other means of access or egress could be unlocked, unsecured or perhaps open whilst the premises were being used for the relevant commercial enterprise. In any event, whilst I was not taken to the statutes and regulations now governing occupational health and safety in Victoria, whatever might have been the practise in earlier generations, it is notorious that building and works sites are now fenced and locked whilst building or works are not in progress. This practice, whether mandated by law or not, is so notorious, I believe that I would be entitled to take judicial notice of it. As it is, however, I do not feel it is necessary to resort to that consideration. In my view, this “Fencing Breach”, as it has been called, has been established as being operative as at the time the Notice was served, viz. 21 December. Mr Rowe, in his email response to Mr Selaci, declined to reinstate the gate until sometime in the future before the end of the lease, when it was convenient for him and his company. The covenant breach is adequately identified in the Notice and the remedial action required was clearly stated in paragraph 3(i)(a) of the Notice.
98Mr Rowe said that ReSource’s obligation to “secure” the premises had been met as from June 2022 and until eviction in January 2023 by the erection of security cameras at opposite corners of the allotment which, together, provide 100 per cent coverage of the block. He said, therefore, the land was under “around the clock surveillance” (CB 56, paragraphs 22-23; TX239, L11-16). This cannot, however, constitute “securing” the allotment. If one were to adopt the quoted meaning and requiring, in effect, fencing of the allotment, camera surveillance clearly would not meet such an obligation. Even adoption of the more general and primary meaning given to the word by the online Oxford Dictionary, namely, “to keep safe from danger, harm or loss to ensure the safety of; protect”, camera surveillance would not achieve the result. Mr Rowe described the cameras as motion activated should an intrusion occur, he would receive an SMS on his phone. Should he receive such an SMS relative to an unauthorised person (as distinct from the contractors which he had engaged to carry out hardstand works) the incursion would already have occurred. Securing requires preventative action to preclude incursion, rather than merely to alert someone after an incursion has occurred. Mr Cadman said that the surveillance was, in itself, a deterrent. Photographs at 173-4 of the Court Book, apparently taken from the surveillance cameras, would make good Mr Rowe’s contention that they provided comprehensive surveillance. The cameras were apparently on poles. The photograph at 172 of the Court Book shows the shadow of a pole, which is presumably the installation of one of the cameras. Acknowledging that the existence of the cameras would provide some deterrence, to conclude that this constituted “securing” the allotment would necessarily entail the conclusion that a residential house with a monitored burglar alarm could be regarded as “secure” if that system were armed and some warning about the installation of a monitor alarm system were displayed on the front of the house, despite the house’s doors and windows being either unlocked or opened.
Works Breach
99I turn next to the covenant breach alleged in clause 2(iii) described in the Pleadings and Submissions as the “Works Breach”. The covenants alleged to be breached, being additional provisions’ clauses 17 and 18, are said by ReSource’s statement of claim to have been misidentified. The Notice does not make clear that the clause numbers are to be found in the additional terms, rather than in the standard printed form of the lease. Mr Sowden noted that the letter dated 19 December 2022 from Shea investment’s solicitors to ReSource’s solicitors, expressly referred to in the Notice, refers to “special condition 18” in connection with the issue of consent to carrying out works. Since this letter is specifically mentioned in the Notice, it could be regarded as incorporated by reference. Alternatively, it could be regarded as comprised of the knowledge or constructive knowledge which the parties are regarded as bringing to the process of construing of the Notice under s146 in accordance with the formulation of Hodgson JA in the Macquarie case, as approved by Judd J, at paragraph 105 of his judgment in Primary RE Limited. The Notice is not to be regarded as insufficient or unintelligible for this reason.
100It is common ground that hardstand works proceeded, but no permit was obtained. ReSource’s case as to this is, inter alia, that compliance with the relevant covenant and terms of the lease was waived by Shea Investments and that in the circumstances it should be estopped from relying upon these matters as a breach of covenant. Mr Cadman referred to the decision of the High Court in Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305, [326]-[328] per Isaacs J and a more recent formulation by Nettle J as a member of the High Court in Crown Melbourne Ltd v Cosmopolitan Hotel (Vic)Pty Ltd [2016] HCA 26, [26] et feq. The evidence showed, and Mr Shea did not deny, that he was well aware of the continuing works and co-operated and assisted with that. In May 2022, Shea Investment’s agent, Ms McMahon, was pressing Mr Rowe as to the progress of the works. Mr Rowe advised he was having difficulty retaining a bulldozer contractor (CB 236-237). Mr Shea said that, hearing this, he made his own online enquiries and identified an available bulldozer contractor, though, by this time, Mr Rowe had secured his own.
101In the circumstances, I accept that the provisions of the lease, insofar as they require landlord consent for the hardstand works or require detailed proposals to be brought forward for approval, can be regarded as having been waived in accordance with the authorities relied on by Mr Cadman, such that Shea Investments cannot now, and could not as at 21 December 2022, complain of noncompliance by ReSource in that regard.
102But that is not the end of the matter. Additional provision 17 states, “The Landlord permits the Tenant to construct buildings and infrastructure, as allowed under appropriate Local Government and other Authority Permits” (CB 133), that is, it places the responsibility of obtaining necessary planning permits on ReSource. Again, it is common ground that the hardstand works required a planning permit and none was obtained. It appears that this was a mistake shared by Mr Shea and Mr Rowe and therefore their respective companies. Mr Sowden said that, since obtaining a permit was a statutory obligation, no estoppel could modify or relieve ReSource as occupier of the property from its obligation to obtain a permit. He said the planning regime was enacted for the benefit of the public or a section of the public. He referred to Maritime Electric Company Pty Ltd v General Dairies Ltd [1937] AC 610, Federal Commissioner of Taxation v Wade (1951) 84 CLR 105 and Moala v Free Wesleyan United Church of Tonga in Australia (Victoria) Inc [2019] VSC 205 [427]-[436] per Ginnane J. Mr Cadman contended however that whilst the doctrine that an estoppel cannot prevail against the mandatory provisions of a statute applied as regards the obligations of a person to observe public law obligations, it did not apply where the statutory obligation was incidental to a private contract.
103If, for instance, a consumer protection measure mandated the inclusion of a particular term in a class of consumer contract, or prohibited its inclusion and provided further that these consumer rights could not be contracted out of by the consumer, plainly, if the consumer could not directly contract out of the statutory entitlement, he should or could not, by the more indirect and more uncertain route of the law of estoppel, achieve the same result, or allow the same result to be achieved for the benefit of the trader or supplier of goods or services. The present situation is different. Giving effect to the estoppel alleged by Mr Cadman on behalf of ReSource would not purport to relieve, as a matter of public law, either ReSource or Shea Investments of its obligations under the Planning and Environment Act 1987 and the relevant planning scheme. It would however modify the incidence between the parties as to which was obliged to discharge the obligation of obtaining the necessary permit. The doctrine does not prohibit this.
104Nevertheless, accepting that Mr Shea must be regarded as having flashed the green light to ReSource and Mr Rowe in a variety of ways, most obviously by his joining in the process of seeking to source labour for the purposes of the work, this can be regarded as a waiver on behalf of its company of its entitlement to insist on detailed plans before consenting to the works. It can scarcely be estopped however from insisting that the obligation to obtain any necessary permit lay with ReSource. There was no discussion on this subject and, indeed, since neither Mr Rowe nor Mr Shea was aware of the need for a permit, there could not have been.
105There was no waiver of the breach of covenant entailed in ReSource’s proceeding with the hardstand works without having obtained the necessary planning permit. This breach of covenant, established as having been committed, it stands un-waived and unremedied.
106Mr Cadman also attacked the Notice insofar as it relied on the “Works Breach” by reference to what paragraph 3 thereof said relative to rectification of this breach at subparagraph (d), namely the removal of all infrastructure works. Mr Cadman referred to a background of works which had been carried out. He referred to evidence of the removal of many truckloads of soil from the site and the delivery onsite of truckloads of what Mr Rowe described as “mud stone”. What had been done, he said, was effectively irreversible. I suggested the analogy of “unscrambling the egg”. He did not dissent (TX301, L31 – X302, L15). The effect of this contention would seem to be that the breach was incapable of remedy. The effect of such a breach was considered by the English Court of Appeal in GovernorsRugby School v Tannahill [1935] 1 K.B. 87. In that case, the lease included a covenant prohibiting the use of the premises for an illegal or immoral purpose. The lessee was convicted of using the premises for habitual prostitution. The notice under s146 of the English Law Property Act 1925 (the equivalent of the Victorian provision), neither sought rectification of the breach, nor compensation. The court considered that the relevant breach was incapable of remedy. The lessee appealed against a judgment against her for possession. Greer LJ, who gave the leading judgment, accepted the finding by the trial judge that the breach in question was incapable of remedy. He continued, “Taking the view as I do that this breach was incapable of remedy, it was unnecessary to require in the notice that the defendant should remedy the breach”. His Lordship continued on the same page: “The further question is whether the absence of any statement in the notice requiring compensation in money in respect of the breach is fatal to the validity of the notice” ([1935] 1 K.B. 87, [91]). His Lordship then proceeded to approve and apply a dictum of Lindley LJ in Lock v Pearce [1893] 2 Ch 271, 279, where his Lordship said inter alia:
“Supposing the lessor does not want compensation, is the notice to be held bad because he does not ask for it? There is no sense in that. The meaning is to be found by looking a little further on. The sub-section begins by saying that the right of re-entry or forfeiture shall not be enforceable unless proper notice is given and the lessee fails within a reasonable time afterwards to remedy the breach and to make reasonable compensation in money to the satisfaction of the lessor. The sense of that is that the lessor must tell the lessee what he wants done. The lessee is entitled to know what his landlord complains of, and, if his landlord is entitled to compensation, whether he wants compensation.” (Ibid [91]-[92]
107Greer LJ therefore concluded that if a lessor did not seek compensation there was no need for it to be demanded in the Notice. Maugham LJ, concurring in the dismissal of the appeal, said, “This breach, in my opinion, was not capable of remedy within a reasonable time, and therefore the lessors were under no obligation to say anything in their notice requiring the lessee to remedy it”.[Ibid [94]] Roche LJ concurred.
108In the fourth edition of their work Commercial Tenancy Law, Croft J, Mr Hay KC and Virgona, at 18.7, cite the Rugby School Case as good law in Australia and as having been adopted and approved by several later English authorities. Accepting Mr Cadman’s contention that this breach was incapable of remedy, the inclusion of what he contended was an impossible mode of rectification ought not to invalidate the Notice insofar as it depends upon this breach. An alternative mode of rectification might be thought to entail obtaining the necessary planning permit. This was not canvassed in the submissions, and therefore need not be considered. I should observe however that a consideration of the provisions of the Planning and Environment Act, which include the potential requirement for advertisement of the planning proposal, time for the lodgement of objections, and even after a determination to grant a permit is made by the responsible authority, the possibility that review may be sought at the Victorian Civil and Administrative Tribunal with whatever details are entailed in bringing the matter on for hearing and reservation of decision following argument. Therefore, a rectification by this mode could not confidently be achieved within a reasonable time, whether any objection to the granting of a permit is lodged or not.
Statutory unconscionability
109ReSource’s case is that, even were Shea Investment’s entitled under the general law of landlord and tenant to re-enter and terminate the lease, such action would constitute unconscionable conduct contrary to the terms of the Australian Consumer Law and that ReSource would be entitled to relief under the provisions of the Law on that basis. The relevant provisions of the Australian Consumer Law are as follows:
“21 Unconscionable conduct in connection with goods or services
(1) A person must not, in trade or commerce, in connection with:
(a) the supply or possible supply of goods or services to a person; or
(b) the acquisition or possible acquisition of goods or services from a person;
engage in conduct that is, in all the circumstances, unconscionable.
(2) This section does not apply to conduct that is engaged in only because the person engaging in the conduct:
(a) institutes legal proceedings in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition; or
(b) refers to arbitration a dispute or claim in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition.
(3) For the purpose of determining whether a person has contravened subsection (1):
(a) the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and
(b) the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section.
(4) It is the intention of the Parliament that:
(a) this section is not limited by the unwritten law relating to unconscionable conduct; and
(b) this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and
(c) in considering whether conduct to which a contract relates is unconscionable, a court's consideration of the contract may include consideration of:
(i) the terms of the contract; and
(ii) the manner in which and the extent to which the contract is carried out;
and is not limited to consideration of the circumstances relating to formation of the contract.
22 Matters the court may have regard to for the purposes of section 21
(1) Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier ) has contravened section 21 in connection with the supply or possible supply of goods or services to a person (the customer ), the court may have regard to:
(a) the relative strengths of the bargaining positions of the supplier and the customer; and
(b) whether, as a result of conduct engaged in by the supplier, the customer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and
(c) whether the customer was able to understand any documents relating to the supply or possible supply of the goods or services; and
(d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the customer or a person acting on behalf of the customer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and
(e) the amount for which, and the circumstances under which, the customer could have acquired identical or equivalent goods or services from a person other than the supplier; and
(f) the extent to which the supplier's conduct towards the customer was consistent with the supplier's conduct in similar transactions between the supplier and other like customers; and
(g) the requirements of any applicable industry code; and
(h) the requirements of any other industry code, if the customer acted on the reasonable belief that the supplier would comply with that code; and
(i) the extent to which the supplier unreasonably failed to disclose to the customer:
(i) any intended conduct of the supplier that might affect the interests of the customer; and
(ii) any risks to the customer arising from the supplier's intended conduct (being risks that the supplier should have foreseen would not be apparent to the customer); and
(j) if there is a contract between the supplier and the customer for the supply of the goods or services:
(i) the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the customer; and
(ii)the terms and conditions of the contract; and
(iii) the conduct of the supplier and the customer in complying with the terms and conditions of the contract; and
(iv) any conduct that the supplier or the customer engaged in, in connection with their commercial relationship, after they entered into the contract; and
(k) without limiting paragraph (j), whether the supplier has a contractual right to vary unilaterally a term or condition of a contract between the supplier and the customer for the supply of the goods or services; and
(l) the extent to which the supplier and the customer acted in good faith.
(2) Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the acquirer ) has contravened section 21 in connection with the acquisition or possible acquisition of goods or services from a person (the supplier ), the court may have regard to:
(a) the relative strengths of the bargaining positions of the acquirer and the supplier; and
(b) whether, as a result of conduct engaged in by the acquirer, the supplier was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the acquirer; and
(c) whether the supplier was able to understand any documents relating to the acquisition or possible acquisition of the goods or services; and
(d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the supplier or a person acting on behalf of the supplier by the acquirer or a person acting on behalf of the acquirer in relation to the acquisition or possible acquisition of the goods or services; and
(e) the amount for which, and the circumstances in which, the supplier could have supplied identical or equivalent goods or services to a person other than the acquirer; and
(f) the extent to which the acquirer's conduct towards the supplier was consistent with the acquirer's conduct in similar transactions between the acquirer and other like suppliers; and
(g) the requirements of any applicable industry code; and
(h) the requirements of any other industry code, if the supplier acted on the reasonable belief that the acquirer would comply with that code; and
(i) the extent to which the acquirer unreasonably failed to disclose to the supplier:
(i) any intended conduct of the acquirer that might affect the interests of the supplier; and
(ii) any risks to the supplier arising from the acquirer's intended conduct (being risks that the acquirer should have foreseen would not be apparent to the supplier); and
(j) if there is a contract between the acquirer and the supplier for the acquisition of the goods or services:
(i) the extent to which the acquirer was willing to negotiate the terms and conditions of the contract with the supplier; and
(ii) the terms and conditions of the contract; and
(iii) the conduct of the acquirer and the supplier in complying with the terms and conditions of the contract; and
(iv) any conduct that the acquirer or the supplier engaged in, in connection with their commercial relationship, after they entered into the contract; and
(k) without limiting paragraph (j), whether the acquirer has a contractual right to vary unilaterally a term or condition of a contract between the acquirer and the supplier for the acquisition of the goods or services; and
(l) the extent to which the acquirer and the supplier acted in good faith.”
110Mr Cadman, for ReSource, stressed a number of points at the outset. First, this new statutory doctrine of unconscionability “is not limited by the unwritten law relating to unconscionable conduct” (s21(4)(a)). In determining whether there has been unconscionable conduct, the Court “is not limited to consideration of circumstances relating to the formation of the contract” (s21(c)), which said the upshot of the very lengthy provisions of s22 setting out the “Matters the court may have regard to” in determining whether there has been unconscionable conduct, is that all circumstances pertaining to the alleged conduct are to be considered. The first of the matters referred to in s22 is “the relative strengths of the bargaining positions of the supplier and the customer” (s22(1)(a)) and paragraph (b) of that subsection, “whether, as a result of conduct engaged in by the supplier, the customer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier”.
111Mr Sowden noted that the issue of statutory unconscionability was raised in ReSource’s statement of claim at paragraph 46, Court Book 27, as follows:
“Further, by reason of the matters alleged at paragraphs 20 and 32 to 40, by issuing the Notice and alleging the Works Breach and seeking strict compliance with Special Conditions 17 to 19, the defendant has engaged in conduct in connection with the provision of goods and services that is in all the circumstances unconscionable and contrary to s 21 of the Australian Consumer Law, … .”
112Acknowledging the breadth of the matters which s21 and s22 entitle a court to consider, Mr Sowden contended that the rules as to pleading, and the pleadings in this proceeding, limited the relevant considerations to the matters pleaded and their surrounding circumstances. There was no application to amend and broaden the statement of claim as regards unconscionable conduct. I accept Mr Sowden’s contention on the scope of the matter which I am required to consider. The first thing to note in this regard is that the unconscionable conduct is said to pertain solely to what has been described as the Works Breach and special conditions 17 to 19 of the lease. There is no contention in the statement of claim that reliance by Shea Investments upon the “Fencing Breach” constituted unconscionable conduct.
113Mr Cadman referred me to the decision of the Full Court of the Federal Court of Australia in Hurley v McDonald’s Australia Ltd [1999] FCA 1728 [29], wherein the court consisting of Emmet, Drummond and Heerey JJ said:
“There is no allegation of any circumstance that renders reliance upon the terms of the contracts unconscionable. For example, it might be that, having regard to particular circumstances it would be unconscionable for one party to insist upon the strict enforcement of the terms of a contract. One such circumstance might be that an obligation under a contract arises as a result of a mistake by one party. The mistake is an additional circumstance that might render strict reliance upon the terms of the contract unconscionable. Mere reliance on the terms of a contract cannot, without something more, constitute unconscionable conduct.”
114He said that, in the present circumstances, ReSource’s failure to obtain a permit under the Planning Scheme was the result of a “mistake”. Mr Shea admitted that he was unaware of the need for a planning permit for the works establishing a hardstand (TX141, L24 – X142, L5). Mr Rowe said that he was aware of the need for a planning permit for use, such as the storage of vehicles, but not for the carrying out of works. It was unconscionable, therefore, said Mr Cadman, for this breach to be relied on as a ground for forfeiture. Mr Cadman also relied on a number of other matters, such as the service of the earlier s146 Notice and in February 2022, Shea Investments’ failure to follow up on it.
115This last circumstance is difficult to attach too much weight too. More generally, in a critique on the manner in which Mr Shea and his company had conducted themselves, Mr Cadman accused them of harassing ReSource and Mr Rowe with repeated visits and correspondence from managing agents sending friends to “spy on” the premises and so on. In particular, he took me to an email from Ms McMahon from Love & Co, the then managing agent, to Mr Shea, dated 10 May 2022 (CB 548), which seems to have arisen out of the issues relative to the engagement of a bulldozer contractor. She complained about the demands which Mr Shea was making upon her employees to obtain results which Mr Shea felt were satisfactory. She concluded the letter by saying:
“I do want to raise though, my unhappiness at the constant threat of having the same fate as your previous managing agent. You have three of our most senior commercial staff on your properties; and we are pushing your tenant to undertake works despite not having the authority under the lease to do. If you feel that we are not providing you good service then please call me and we can discuss what your desired outcomes are, and whether we can service those or whether it is a case where we need to hand back the management files.” (CB 548)
116On balance, the flavour of ReSource’s case, its correspondence and Mr Rowe’s evidence, was not that Mr Shea and his company were hanging back from seeking to enforce their rights, but, rather, that he and his company were going “over the top” and engaging in harassment. This is inconsistent with the view that Shea Investments was lulling ReSource into a false sense of security by lack of action or complaint.
117To return to the particular matter, I do not believe that the Full Federal Court in Hurley’s case was referring to the sort of “mistake” under which Messrs Rowe and Shea were labouring, namely, the relief that no planning permit was required for the hardstand works. There was no mistake as to the existence of the relevant term in the lease or as to its meaning viz. if, as a matter of law, the permit was required for the carrying out of works, the planning permit was the responsibility of the tenant. Provisions such as this seek to deal with a large range of matters which are not in the immediate contemplation of the parties. In this case, neither Mr Shea, nor Mr Rowe, contemplated that ReSource was seeking to convert the subject property to a handstand for storage. They believed that it would be developed as an e-waste recycling facility. Provisions such as the present are intended to allocate liability and responsibility, both as to particular matters that may be in contemplation and others that are not. They are, by nature, ambulatory. Works which might require a planning permit at the time a lease is entered into may be exempt or “as of right” requiring no permit by the time an occasion arises for them to be carried out. Conversely, works which may be exempt or as of right when the lease is granted, may, during the course of the lease, come to require a permit if carried out at a later date. In my view, the Full Court in Hurley, is referring to mistakes relative to a contract, not to issues which may arise as to its performance months or years later. The effect of the relevant provisions is that the responsibility for determining what permits are required for any actions that are taken by way of carrying out works on the property lay with ReSource.
118Mr Cadman also contended that a consideration of the relative bargaining strengths of the party would find an inequality in favour of Shea Investments, such that this would be a factor tending towards characterising its actions as unconscionable. It said the very relationship of landlord and tenant was, in effect, to provide the lessor with the quote “whip hand” [not his metaphor]. I reject that contention.
119Shea Investments appears to be a private investment company. Mr Shea, as the director and controller of that company, is elderly and presumably resides in retirement in Queensland. The evidence showed, incidentally, that he or his company have at least one other property investment in the Somerton area, in relation to which he complained of liability attaching to him or his company for someone else’s illegal dumping. The extent of his property holdings did not otherwise emerge in evidence. He did not, however, appear to be a “tycoon”. In general terms, “private investor” would appear to be the appropriate characterisation. Mr Rowe described himself as “the owner of various recycling related companies” (T94, L43). He continued: “we currently operate the largest … electronic waste recycling facility in the country(T94, L9-13). He said he held the Degree of Bachelor of Commerce, majoring in accounting, but did not practise the profession of accountancy, so was not a member of either of the peak professional bodies (Ibid, L27-45). He said of his recycling facility in Derrimut:
“It’s a 15,000 square metre facility, six and a half thousand square metre building. We operated by far the largest e-waste recycling machinery in Australia. It’s approximately a 2000 horsepower line. We’ve got a megawatt of solar on the roof. It’s a substantive facility. Invested near on $10 million to date in the facility (T95, 25-30).
120As to business experience and general standing in the commercial world, therefore, Mr Rowe and ReSource would appear to have no less bargaining power than Shea Investments. I do not accept that merely being a landlord necessarily bestows superior bargaining power. A private individual might be the grantor of a lease, say, to the Commonwealth of Australia or the Broken Hill Proprietary Company Limited. In those circumstances, it could scarcely be contended that the balance of bargaining power lies with the private individual as against the behemoth. Again, cases such as Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 indicate that a tenant can be regarded as having engaged in unconscionable conduct as against a landlord. Another element of statutory unconscionability relied on by Mr Cadman was an allegation that Shea Investments had not acted in Good Faith insofar as it had sought to exact the surrender of ReSource’s option to purchase, as the price of consenting to the proposed sublease, given that the subleasing covenant precluded Shea Investments from unreasonably withholding consent, I accept it would be unreasonable for such consent to be withheld because of a refusal by ReSource to surrender a valuable entitlement in the form of the option to purchase the freehold of the property. Nevertheless, ReSource contends and Shea Investments concedes, that there was no breach of subleasing covenant by ReSource. I therefore accept the contention put by Mr Sowden that the allegation of lack of good faith “goes nowhere”. Assuming a lack of good faith in Shea Investment’s treatment of the subleasing covenant, it formed no part of that company’s contention that it has validly terminated the lease.
121I am not persuaded that Shea Investments engaged in unconscionable conduct by using the lack of a planning permit as a ground for terminating the lease.
122If, contrary to my reading of the statement of claim it is contended that reliance on the “Fencing Breach” was unconscionable, I would likewise reject such a contention. The fencing issue was the subject of continuing complaint by Shea Investments. Mr Rowe said he had rectified the break made in the fencing by a trespasser in February 2022, yet the photographs show the metal posts in that area at a skewed angle. Asked about this, Mr Rowe said they were “concreted into” (TX196, L8-22), yet the heads of agreement and unexecuted lease with Mr Micallef required the latter to “straighten” the posts, which is scarcely consistent with them having been concreted into place during repair work in February 2022.
Disposition of the Plaintiff’s claim
123The proceeding was argued on the basis that if the Notice were good as to any one established breach, the defendant was entitled to re-enter and forfeit as it did. My findings uphold the validity of two of the four breaches alleged in the Notice. It follows that ReSource’s claim must fail.
124Had it succeeded, ReSource sought to recover the outlays which it made on the now (from its point of view) abortive hardstand project. I was told that the documentation showing the outlay of the relevant funds was to be found within the bundle of documents exhibited to Mr Rowe’s first affidavit. ReSource also sought damages for the loss of the benefit of its option to purchase. It relied, as to these matters, upon an evaluation report by a Mr Matt Webb of Urbis Valuations Pty Ltd, dated 12 February 2024 (CB 453). In assessing what he regarded as the present value of ReSource’s loss, he postulated a wide range from $430,000 at the lower end to $1,000,040 at the higher end. Implicitly, the median between these two figures should be regarded as the most probable value for that loss in Mr Webb’s expert opinion. During cross-examination, he gave an account of the trend in the market for industrial land on the outskirts of Melbourne and his report shows what might be described as a “spike” occurring in the wake of the pandemic (see the graph at CB 474). He said, on the same page, “the last five years are an extraordinary period in terms of land value growth in the Melbourne industrial market”. The graph depicted the market in the “North Precinct”, which would include Somerton. He said, however, that the rate of increase in industrial land values had slackened and had continued to slacken since February 2024, when he finalised his report, leading him to the view that the proper value of the loss of opportunity relative to the loss of opportunity for ReSource now fell somewhere below the median figure within his stated range. In closing submissions, Mr Cadman posited a figure of $700,000 (TX329, L6-20).
125It follows that the claim for this loss should also fails by reason of the failure to ReSource’s attack on the validity of the Notice unless the option could be regarded as a “freestanding” entitlement which would survive the termination of the lease in which it was to be found.
126On this subject, Mr Sowden relied on the unreported decision of Barrett J (as he then was) in Tim Barr Pty Ltd v Nauri Gold Coast Pty Ltd [2010] NSWSC 29, wherein his Honour considered a similar issue. In the Tim Barr case was exercise up to expiration of the lease, although in that instance the option was exercisable at any time up to the expiration of the lease. In contrast, the option to purchase granted to ReSource, special condition 22 of the lease (CB 210) is exercisable only “at the conclusion of the term”. Therefore, in Tim Barr’s case and the present, the option, whilst not in identical terms, may not be exercised after the expiration of the lease or, to use the language of special condition 22, “at the conclusion of the term”. Special condition 22 provides for the option to be exercisable if ReSource, “throughout the term of this lease, pays rent regularly and does not breach and does not fail to comply with the provisions of this lease in a way which is serious or persistent or both”. I have heard no allegation of any rental default. Plainly, special condition 22 provides that the option to purchase may be defeasible, even if ReSource were to “go the distance” to the end of the lease if, during the course of that lease, there were rental defaults or persistent or serious breaches of the other covenants of the lease. Without expressing any view as to the seriousness or otherwise of the Fencing Breach, it extended over a lengthy period of time and persisted despite both formal admonishing and the formality of a notice under s146 of the Property Law Act 1958. That, itself, is sufficient to deprive ReSource of the option.
127Tim Barr’s case entailed a lengthy analysis of the language of the lease in question, leading Barrett J (as he then was) that the option to purchase did not survive the valid determination of the lease in that instance [2010] NSWC 29 [188]-[205]. In broad terms, his Honour concluded that the option bound the lessor in its capacity as landlord, and in that capacity alone. The language and special condition 22 of the lease in this case also identifies the grantor of the option as “the landlord”, leading to the same conclusion as was reached by his Honour.
Counterclaim
128In Shevill v Builders Licensing Board (1982) 149 CLR 620, a landlord exercised a right to enter by reason of nonpayment of rent in accordance with a contractual right of re-entry contained in the lease. The High Court considered that the breach of the lease covenant by the tenant fell short of constituting a repudiation. The trial judge awarded the damage to the landlord:
“… assessed by having regard to the amount which the [landlord] would have received by way of rent during the remainder of the term and after giving credit for the amounts of rent which it was able to receive from the property during that period. … .” (Ibid, [624]-[625] per Gibbs CJ)
129The court set aside this damages judgment and according to the Chief Justice, the landlord “was entitled to recover the arrears of rent but was not entitled to the damages” (Ibid) at [630]). It was not contended, and could not have been contended, that according to general contractual principles, ReSource had repudiated the lease. It had not evinced an intention that no longer should be bound by its terms, even if on the findings I have made it was in breach of covenant. The High Court’s later decision in Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237, approved a drafting technique for leases whereby certain lease covenants were identified as being “essential”, such that breach of one or more of them would be deemed to constitute repudiation. The present lease included such a clause, 7.4 of the printed form (CB 121). Mr Sowden did not contend that this clause was operative and that any of the breaches relied upon were rendered essential so that there was a deemed repudiation on the part of ReSource.
130Shevill’s case precludes recovery by a landlord of “loss of bargain” damage by a landlord, who, or which has, terminated the lease for breach of covenant falling short of repudiation. It would not, for instance, preclude a landlord from recovering damages for breach of covenant resulting in permanent damage to buildings for instance.
131This counterclaim is for the amount invoiced or quoted by Mr Micallef to complete hardstand works on the property in an invoice or quotation dated 13 February 2023. Had ReSource covenanted with Shea Investments to carry out the hardstand work, no doubt the cost of making good its failure to complete such works might be recoverable. There is no such covenant in the lease. In any event, as Mr Cadman pointed out, there are anomalies and gaps in proof relevant to the contention that the invoice amount was in truth outlaid by Shea Investments . The lease dates from April, though the invoice was rendered in February 2023. No books of account showing offsets or credit was provided, nor was it explained how $104,000 could have been credited against an annual rental of $70,000 and outlaid in less than a year viz between 4 May 2023 and 7 August of that year (see [37] above). For these reasons the counterclaim fails.
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