Riviera Holdings Pty Ltd V Fingal Glen Pty Ltd - [2013] SASC 77

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
RIVIERA HOLDINGS PTY LTD v FINGAL GLEN PTY LTD
[2013] SASC 77
Reasons for Decision of The Honourable Justice Nicholson
28 May 2013
EQUITY - GENERAL PRINCIPLES - GENERALLY
EQUITY - GENERAL PRINCIPLES - PENALTY - RELIEF AGAINST PENALTY AND FORFEITURE
REAL PROPERTY - TORRENS TITLE - LEASES - DETERMINATION - FORFEITURE AND RELIEF AGAINST FORFEITURE
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - OTHER MATTERS
Fingal Glen Pty Ltd held a 5 year lease of motel premises and a 5 year lease of adjacent carpark premises from Riviera Holdings Pty Ltd both of which commenced 6 October 2009. Each lease contained multiple rights of renewal. In breach of the leases, Fingal failed to pay rents for May 2012 and on 4 June 2012 Riviera served notices of forfeiture and re-entry. On 9 November 2012 orders were made in this Court in favour of Riviera, including a declaration that the leases had been terminated on 4 June 2012 and an order that Riviera was to have possession of the motel premises and the carpark premises. This judgment was stayed on conditions so as to enable Fingal to pursue its cross-claim for relief against forfeiture of its proprietary interests under the leases. By the time the cross-claim came on for hearing, Fingal had remedied the breaches. However, there had been an extensive history of non-compliance with lease obligations. During the trial an order for the winding up of and appointment of a liquidator to Fingal was made in the Federal Court.
Issues considered included: whether the lessor has now received all to which is it entitled under the leases; whether, if relief were to be granted, the lessee will be able to perform its financial obligations under the leases into the future; whether anticipated or actual appointment of a liquidator is a bar to relief; whether the nature and gravity of the breaches and their effect on the lessor is wholly disproportionate to the prejudice the lessee will suffer should relief not be granted; and whether the lessor will accrue a benefit or windfall if relief is refused.
Held: Relief against forfeiture allowed. In all the circumstances, it is just and equitable to grant relief.
Evidence Act 1929 s59J; Landlord and Tenant Act 1936 s9, s10; Corporations Act 2001 s459E; Commercial Tenancy Law 3rd ed 2009, LexisNexis Butterworths Australia, Bradbrook Croft and Hay at [19.1], referred to.
Jones v Dunkel (1959) 101 CLR 298; Shiloh Spinners v Harding [1973] AC 691; Legione v Hateley [1983] HCA 11, (1983) 152 CLR 406; O’Dea v Allstates Leasing System (WA) Pty Ltd [1983] HCA 3, (1983) 152 CLR 359; AMEV-UDC Finance Ltd v Austin [1986] HCA 63, (1986) 162 CLR 170; Stern v McArthur [1988] HCA 51, (1988) 165 CLR 489; Esanda Finance Corporation Ltd v Plessnig [1989] HCA 7, (1989) 166 CLR 131; Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57, (2003) 217 CLR 315; Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW Ltd (1970) 2 BPR 9562 (NSWSC); Cicinave Pty Ltd v Jasco Pty Ltd (1989) 5 BPR 11,139 (NSWSC); Tannous v Cipilla Bros Holdings Pty Ltd (2001) 10 BPR 18,563; Wilkinson v S & S Gikas Pty Ltd (2006) 12 BPR 23,685, [2006] NSWSC 1314; Tutita Pty Ltd v Ryleaco Pty Ltd (1989) 4 BPR 9635, (1989) NSW ConvR 55-486; Wynsix Hotels (Oxford St) Pty Ltd v Toomey [2004] NSWSC 236; Hayes v Gunbola Pty Ltd (1986) 4 BPR 9247, (1988) NSW ConvR 55-375; Jam Factory Pty Ltd v Sunny Paradise Pty Ltd [1989] VR 584; Kelly & Anor v The Alternative Web Pty Ltd [2010] SASC 4; Lo Guidice v Biviano (No 2) [1962] VR 420; Old Papa’s Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd & Ors [2003] WASCA 11; Direct Food Supplies (Vic) Pty Ltd v DLV Pty Ltd [1975] VR 358; Greenwood Village Pty Ltd v Tom the Cheap (WA) Pty Ltd [1976] WAR 49; Howard v Fanshawe [1895] 2 Ch 581; Stieper v Deviot Pty Ltd NSWSC unreported 21 April 1977; Re Brompton Securities Ltd (No 2) [1988] 3 All ER 677; Hace Corp Pty Ltd v F Hannan (Properties) Pty Ltd (1995) 7 BPR 14,326; Sparta Nominees Pty Ltd v Orchard Holdings Pty Ltd & Ors [2002] WASC 54; Lontav Pty Ltd v Pineross Custodial Services Pty Ltd [2011] VSC 278; Liristis Holdings Pty Ltd v Wallville Pty Ltd (2001) 10 BPR 18,801, [2001] NSWSC 428; Re Discovery Books Pty Ltd (1973) 20 FLR 470; McKern & Ors v Minister Administering the Mining Act 1978 (WA) (2010) 28 VR 1; VR Dye and Co v Peninsula Hotels Pty Ltd (in liq) & Anor [1999] VSCA 60; Shevill v Builders Licensing Board (1982) 149 CLR 620; Mineaplenty Pty Ltd v Trek 31 Pty Ltd [2006] NSWSC 1203; Gill v Lewis [1956] 2 QB 1, considered.

RIVIERA HOLDINGS PTY LTD v FINGAL GLEN PTY LTD
[2013] SASC 77
Civil
NICHOLSON J.
Introduction

Between 6 October 2006 and 4 June 2012 Fingal Glen Pty Ltd (defendant and cross-claimant – “Fingal”) was the lessee of premises at North Terrace, Adelaide from which it operated a motel business known as the Comfort Hotel Adelaide Riviera and adjacent carpark (together, “the land”).[1] On 9 November 2012, orders in this Court were made in favour of the landlord, Riviera Holdings Pty Ltd (plaintiff and cross-defendant – “Riviera”) including order 2, as follows.
The plaintiff re-entered into and upon the land in the name of the whole on 4 June 2012 and has since that date been entitled to have repossess and enjoy the same as of its former estate as the registered proprietor thereof with the effect that registered leases numbers 11744850 and 11744794 absolutely ceased and determined on 4 June 2012.
[1] Registered leases numbers 11744850 (motel lease) and 11744794 (carpark lease), Trial Book MFI P1 (TB) volume 3, pages 864 and 911 (TB 3/864, TB 3/911).
In addition, Fingal was ordered to give Riviera possession of the land within three days of service of a copy of the orders made on 9 November 2012. However, the judgment given in favour of Riviera on 9 November 2012 was stayed on terms so as to enable Fingal to prosecute a claim for relief against forfeiture of its proprietary interests under the leases.[2] Since 4 June 2012, Fingal has remained in occupation of the land and has continued to conduct its motel business pending the outcome of its cross-claim.
[2] Orders made by this Court on 15 November 2012 and 7 December 2012 TB 5/1685, 1688. Throughout its pre-trial correspondence and the trial itself, Riviera was careful to use the term “former” leases. This terminology is correct. The (former) leases came to an end on 4 June 2012. However, throughout this judgment I will confine myself to use of the term lease or leases when referring to that which has been forfeited.
Riviera’s claim to forfeit the leases was based on a failure by Fingal to pay the rents for May 2012, in advance and on the first day of May 2012, in the amounts of $45,985.38 (motel lease) and $1775.04 (carpark lease). As a result of these non-payments, Riviera served Fingal with two notices of re-entry pursuant to clause 14.3 of each lease. Whilst the re-entry and the forfeiture of each lease by Riviera was based on non-payment of just the May 2012 rent this was, on Riviera’s case, the final straw which brought to a head an extensive history of late payment of rent and outgoings by Fingal, other breaches of the leases and misleading and otherwise unsatisfactory behaviour by Fingal towards Riviera. The tone of Riviera’s case at trial was to the effect that the camel’s back had been broken and Riviera was determined to resist any applications for relief and to hold on to the forfeitures.
In due course, the outstanding rents for the month of May were paid. As at the date that I first reserved my decision in this matter (1 March 2013)[3] all rent, outgoings and other payments due under the terms of each lease had been paid.
[3] By consent, Riviera re-opened its case on 15 April 2013 for the purpose of tendering orders made by the Federal Court on 8 March 2013 that Fingal be wound up in insolvency and appointing an official liquidator (D42).
The proceedings before me were conducted on the basis of affidavits all of which are to be found in the five volume trial book. Fingal read affidavits by one of its directors, John Phillip Buff, sworn 27 September 2012 (first Buff affidavit),[4] 17 October 2012 (second Buff affidavit),[5] 24 October 2012 (third Buff affidavit),[6] 12 December 2012 (fourth Buff affidavit)[7] and 23 January 2013 (fifth Buff affidavit).[8] Fingal also read an affidavit of James Chapman sworn 13 December 2012 (Chapman affidavit).[9] Both Mr Buff and Mr Chapman were cross-examined; Mr Buff extensively so.
[4]    TB 1/56.
[5]    TB 2/341.
[6]    TB 2/442.
[7]    TB 2/446.
[8]    TB 2/475.
[9]    TB 3/789.
Also included in the trial book is a series of affidavits by another director of Fingal, Leslie Frank Hammond. These were not read in Fingal’s case and, accordingly, Mr Hammond was not presented for cross-examination.[10] However, portions of his affidavits were tendered by Riviera, without objection, but for limited purposes only. Leslie Hammond swore affidavits on 27 June 2012 (first Hammond affidavit),[11] 12 December 2012 (second Hammond affidavit)[12] and 23 January 2013 (third Hammond affidavit).[13]
[10] Riviera has made a submission in reliance on Jones v Dunkel (1959) 101 CLR 298. However, it is not necessary that I reach a view about that submission.
[11] TB 2/688.
[12] TB 3/781.
[13] TB 3/784.
Riviera read affidavits affirmed[14] by a director, Nicholas Economos, on 6 June 2012 (first Economos affidavit),[15] 16 July 2013 (second Economos affidavit),[16] 10 October 2012 (third Economos affidavit),[17] 12 October 2012 (fourth Economos affidavit),[18] 15 November 2012 (fifth Economos affidavit)[19] and 20 December 2012 (sixth Economos affidavit).[20] Riviera also read an affidavit of David Gardner affirmed 6 June 2012.[21] Only Mr Economos was cross-examined and only briefly. The matters of fact to which he deposed were not challenged to any significant extent and, subject to any qualifications expressed below, I accept them as established.
[14] Mr Economos affirmed all of his affidavits but when called to give oral evidence swore on oath. This difference in approach was not taken up in cross-examination. An intervening “road to Damascus” experience must be assumed.
[15] TB 3/840.
[16] TB 3/953.
[17] TB 5/1517.
[18] TB 5/1607.
[19] TB 5/1631.
[20] TB 5/1679.
[21] TB 3/819.
Some history
The following matters of fact are common ground.
(i)In September 2006, the Adelaide Riviera Investment Trust was established with Fingal as trustee.
(ii)In October 2006, Fingal, in its capacity as trustee, purchased from Riviera the motel business as a going concern, as then conducted on the land, for the sum of $1.8M.[22]
[22] Assertions as to the purchase of the business and the price paid are in the first Hammond affidavit but this affidavit is not before the Court for this purpose. Nevertheless, the fact that the motel business was purchased as a going concern for $1.8M was not in contest. If necessary, I would rely on the power conferred by s59J of the Evidence Act 1929 to make this finding.
(iii)Riviera granted leases of the motel premises and the carpark premises to Fingal, each for an initial term of three years, commencing 6 October 2006 and expiring 5 October 2009. The respective rents were $470,000 (exclusive of GST) per annum (the motel) and $20,000 (exclusive of GST) per annum (the carpark) subject to annual review. Each lease conferred six rights or options to renew, each for five years. The expectation of the parties was that, provided each of the options to renew was effectively exercised, Fingal would be entitled to occupy the land and conduct the motel business until 5 October 2039.[23]
[23] The initial leases are to be found in TB 1/139 (carpark) and 179 (motel).
(iv)After these initial leases expired they were renewed for a term of five years commencing 6 October 2009. This term was due to expire by effluxion of time on 5 October 2014. Each of the renewed leases contained five further rights of renewal each for five years (such that the last term as renewed would expire 5 October 2039). The new rent was $560,000 (exclusive of GST) per annum (the motel) and $21,615.96 (exclusive of GST) per annum (the carpark). It was these two leases[24] that were brought to a premature end as a result of Riviera’s notices of re-entry based on non-payment of the rents for May of 2012.
[24] TB 3/864, 911.
(v)The initial and renewed motel leases and the initial and renewed carpark leases all required rent and outgoings to be paid monthly on the first day of each month during the term. However, a habit (Fingal describes it as a practice) developed to the effect that Fingal was permitted to pay rent and outgoings on the sixth day of each month so as to accord with the date of commencement of the initial leases. Notwithstanding this indulgence, Fingal was habitually late with payment of rent and outgoings even on the basis of an allowed day of payment being the sixth day of the month. Exhibit NE1 to the second Economos affidavit[25] is a document headed “Riviera Motel Rent Invoiced Payment Schedule”. It sets out in chart form the rent due for each month starting 6 October 2006 until July 2012 and the date on which each rent payment was received, as cleared funds, in Riviera’s account. Even after allowing for a “due” date of the sixth of the month, it can be seen that for the 64 months between October 2006 and April 2012 inclusive, the rents were paid late (that is, later than the sixth of the month) on all but 15 occasions. Late payments varied from a matter of two or three days late up to a number of weeks late and on rare occasions as much as six or seven weeks late.
[25] TB 3/976.
(vi)On 4 April 2012, the solicitors for Riviera sent a letter to Fingal enclosing a Notice to Remedy Breaches of Leases and putting Fingal on notice that any previous practice to the effect that monthly rent instalments could be paid on the sixth of each month was no longer acceptable.[26] The letter included the following.[27]
[26] TB 4/1434.
[27] TB 4/1436.
In the past, Riviera has been prepared to accept payment of the monthly rent instalments, in advance, on the sixth day of the calendar month, so as to coincide with the day of the month on which the term of the leases commenced.
The poor payment history from Fingal causes Riviera to withdraw this concession, and to require that Fingal perform the terms of the leases in accordance with their agreed provisions.
Accordingly, whist Riviera will accept Friday 6 April 2012 as the last day for payment of rent under the leases for the month of April 2012, it gives notice that all future monthly instalments of rent are to be paid in advance on the first day of each and every month during the term, as provided in the leases, commencing on Tuesday 1 May 2012.
(vii)The Notice to Remedy, included in the solicitor’s letter of 4 April 2012, complained about Fingal’s conduct in entering into deferred payment arrangements with the Adelaide City Council, Revenue SA (Land Tax) and SA Water (contrary to the requirements of the leases) and its failure to make timely payment of various rates and other outgoings as required under the leases. The Notice to Remedy[28] sought reimbursement in the amount of $87,355.13 upon Riviera having paid all then outstanding rates and outgoings.
[28] By s10 of the Landlord and Tenant Act 1936 a landlord is not entitled to exercise a right of re-entry conferred by the lease for breach of covenant without first serving a notice in accordance with s 10.
(viii)On 18 April 2012, Riviera provided to Fingal by email a further (that is, amended) Notice to Remedy which included a demand for reimbursement of outgoings paid by Riviera in a reduced amount of $79,855.13.[29]
[29] TB 5/1470.
(ix)During April 2012, Fingal made payments to Riviera in satisfaction of the demand of 18 April 2012 by way of four instalments.[30]
[30] TB 5/1497.
(x)On 1 May 2012, the rents for May 2012 fell due.
(xi)On 1 June 2012, the rents for June 2012 fell due.
(xii)On Monday 4 June 2012, Riviera served on Fingal two notices of re-entry[31] in reliance on the unpaid May 2012 rents in the amounts of $45,985.38 (inclusive of GST) with respect to the motel lease and $1,775.04 (inclusive of GST) with respect to the carpark lease (in total, $47,760.42).
[31] TB 3/824.
(xiii)On the afternoon of 4 June 2012, a cheque in the sum of $57,483.92 drawn on Fingal’s bank account was deposited into the account of Riviera held at the Bank SA King William Street branch. This occurred after Riviera, by its notices, had effected a re-entry.
(xiv)On Tuesday 5 June 2012, the solicitor for Fingal received a letter from Riviera’s solicitors to the effect that Riviera would not accept payment of that amount of money by cheque. It would seem that, to this point, the deposited cheque had not been cleared. Whether or not Riviera would have received cleared funds had the cheque not been cancelled by Fingal (see below) is not apparent from the evidence. I set out the letter from Riviera’s solicitors in full (formal parts omitted).[32]
[32] TB 4/1172.
I refer to [Fingal’s solicitor’s] telephone call late this morning, and his subsequent emails sent at 11.47am and 12.14pm.
My client’s enquiries with its bank reveal that:
1.A cheque was deposited at BankSA to the credit of my client’s bank account yesterday at 4.18pm, in the sum of $57,483.92.
2.No information accompanied the deposit to explain its purpose.
3.Having accepted the deposit, BankSA is now unable to reject it.
My instructions are that:
1.The deposit was made without my client’s knowledge or consent.
2.My client first learnt of the deposit this morning.
3.The amount of the deposit is not referable to a sum owed to my client.
4.It appears that the deposit was made in response to the Notices of Re-entry that were served on your client at the premises at 31-34 North Terrace, yesterday, at 2.34pm.
5.My client had previously confirmed that it would not accept payments by cheque, or payments which were unidentified.
6.My client has refused to accept payments from your client by cheque because of the history of its cheques being dishonoured on presentation.
7.There is a requirement that payments be made by EFT.
8.Your client’s arrangements with its bank are not my client’s concern.
9.Your client was on notice that:
a.    it was required to pay the amounts due under the Leases in full, by the due date;
b.    any unauthorised payments would be returned; and
c.    if your client paid the amounts late, it did so at its peril.
10.There is, and was, no arrangement with my client for your client to pay less than what was provided in the Leases.
11.The Notices of Re-entry that were served on your client at the premises at 31-34 North Terrace, Adelaide, yesterday afternoon, record that my client has re-entered the premises and that the leases have been determined.
12.Any monies which are paid to my client after the service of the Notices of Re-entry can only be by way of reduction of the amounts owing to it as debts under the former leases, or in diminution of its claim for damages following re-entry.
13.In the absence of an acknowledgment by your client that the deposit be applied in the foregoing manner, it will not be accepted by my client and, as in the case of other unauthorised payments, will be returned.
14.It is not open for your client to pay any monies to my client on the basis that those payments maintain the existence of the leases, and are to be credited to ongoing amounts due under the leases.
15.My client will not “withdraw” the Notices of Re-entry.
16.My client considers that the Notices of Re-entry have validly determined the Leases.
Accordingly, please confirm:
1.that your client will comply with the Notices of Re-entry and deliver up possession of the premises, in an orderly manner, today; and
2.if you have instructions to accept service of proceedings on behalf of your client.
(xv)The solicitors for Fingal, by email on 5 June 2012, replied in the following terms (formal parts omitted).[33]
[33] TB 4/1176.
We refer to previous communications and to your letter of today’s date received by email at 4.45pm.
We respond to the matters set out in your letter as follows:
1.There is no requirement for the lessee to obtain the consent of the lessor to pay moneys properly due under the lease.
2.It would be readily apparent to your client that the payment is an amount equivalent to one month’s rent under the leases.
3.The assertion by your client that:
3.1     the payment made by the lessee was in response to the notices of re-entry;
3.2     your client had confirmed that it would not accept payments by cheque, or payments which are unidentified;
3.3     there is a requirement under the leases for payments to be by EFT; and
3.4     there was no arrangement for my client to pay less than the full amount due under the leases,
is disputed and in any event irrelevant.
4.The lessor has no right to re-entry as a result of the payment made by the lessee.
5.Any action by the lessor to enforce a right of re-entry under the leases on the basis of the notices dated 4 June 2012 will be vigorously defended by the lessee.
The notices of re-entry, if properly issued, are of no effect as the lessee has complied with its obligations to pay the arrears of rent due under the leases and the lessee will not delivery [sic] up possession of the premises.
We will advise you tomorrow whether we have instructions to accept service of proceedings.
(xvi)Early the next morning, 6 June 2012, the solicitors for Fingal sent a further email to the solicitors for Riviera (formal parts omitted).[34]
[34] TB 4/1179.
We refer to our letter of 5 June 2012, sent by email last night.
We have taken further instructions from our client.
We are instructed that as a result of the matters raised in your letter of yesterday, our client has cancelled the cheque that was paid into the lessor’s account on Tuesday and late yesterday afternoon arranged thorough [sic] its bankers for an EFT payment to the account of the lessor in the sum of $47,760.42.
For your client’s benefit, and in case there is any doubt as to what the deposit is referable to, the amount of the payment is for the arrears of rent under the leases for May 2012.
We note in your letter of 5 June 2012 that you have requested advice as to whether this firm has instructions to accept service of proceedings on behalf of the lessee.
We can only assume from the contents of your letter that the lessor intends to issue proceedings to seek possession of the premises as a result of the service of the notices dated 4 June 2012.
It is our view that the lessor has no lawful basis to seek re-entry, or that if there was a right of re-entry, that right was extinguished by the payment made to your client of the arrears of rent for May.
In the event that your client issues proceedings on that basis, our instructions are to vigorously oppose any application for possession and/or seek relief against forfeiture.
While the usual position might be that a lessee is required to pay the costs of an application for relief against forfeiture, in this case, as any arrears have been paid in full prior to the issue of proceedings, the lessee will be seeking costs on an indemnity basis, if it is required to defend or issue proceedings.
We are instructed to accept service of any proceedings which your client proposes to issue.
We reserve the right to produce this letter in support of an application for costs.
(xvii)Late on that same day, 6 June 2012, the solicitors for Riviera replied in the following terms (formal parts omitted).[35]
[35] TB 4/1182.
I refer to your letters dated 5 June 2012 sent at 5.48pm and 6 June 2012 sent at 9.38am.
1.Your letter dated 6 June 2012 sets out your then instructions that:
1.    “…as a result of the matters raised in your letter of yesterday,…”
2.    “…our client has cancelled the cheque that was paid into the lessor’s account on Tuesday and…”,
3.    “…late yesterday afternoon arranged thorough [sic] its bankers for an EFT payment to the account of the lessor in the sum of $47,760.42.”
1.    Would you clarify which of the matters raised in my letter dated 5 June 2012 you are referring to and whether your most recent instructions require you to withdraw or amend any of the responses contained in the numbered paragraphs of your letter dated 5 June 2012?
2.    When you say that your client “cancelled” the cheque, do you mean that your client countermanded the authority of its bank to pay the cheque, i.e. in colloquial terms, “stopped payment”?
3.    My client’s bank has informed my client that an amount of $45,985.38 (not $47,760.42) was transferred electronically to its account at 3.33pm AEST yesterday via a RTGS payment from L & R Finance Group Pty Ltd (“the transfer”). Does your client agree that this information is correct?
2.The transfer, like the deposit made in my client’s bank account on 4 June 2012, was effected without my client’s knowledge or consent.
3.Your letter dated 6 June 2012 states (after the event) that “…the amount of the payment [i.e. the transfer] is for the arrears of rent under the leases for May 2012”.
4.That statement of the basis on which the transfer was effected is contrary to paragraphs 12 and 14 of my letter dated 5 June 2012, i.e.
“12. Any monies which are paid to my client after the service of the Notices of Re-entry can only be by way of reduction of the amounts owing to it as debts under the former leases, or in diminution of its claim for damages following re-entry.
…
14.     It is not open for your client to pay any monies to my client on the basis that those payments maintain the existence of the leases, and are to be credited to ongoing amounts due under the leases.”
5.My client does not accept the basis of the transfer stated in your letter dated 6 June 2012.
6.As foreshadowed in my letter dated 5 June 2012, i.e.
“13. In the absence of an acknowledgement by your client that the deposit be applied in the foregoing manner, it will not be accepted by my client and, as in the case of other unauthorised payments, will be returned.”
The transfer has been returned as follows:
“Transfer to: Fingal Glen
BSB: 013274
Account Number: 184499159
Customer Reference: Returned Funds
Amount: $45,985.38”.
I interrupt this chronology of common ground to observe that, as at 5 June 2012, Fingal was willing to and had the capacity to pay to Riviera, at least the sum of $45,985.38 towards a purported discharge of its obligation to pay the rent under the motel lease for the month of May 2012.[36] This amount matched the amount claimed by Riviera for unpaid rent for May 2012 as identified in the motel lease notice of re-entry.[37] According to Mr Buff, it was “by oversight” that the EFT payment did not include payment of the amount due for May 2012 ($1,775.04) identified in the carpark lease notice of re-entry. It is also clear that Riviera was less interested in retaining any money paid on account of arrears of rent for the month of May than it was in preserving the strict legal position that the leases had been terminated on 4 June 2012 and that any monies thenceforth paid by Fingal could only be characterised and accepted as by way of “reduction of the amounts owing to [Riviera] as debts under the leases or in diminution of [Riviera’s] claim for damages following re-entry”. I am satisfied that, from no later than this time, Riviera had set its face against any reinstatement of the leases either by express agreement or to be inferred from conduct. Furthermore, for so long as the solicitors for Fingal were to persist in characterising (wrongfully, as a matter of law) any proffered payment as “rent” Riviera would be determined not to accept it. It should also be noted that whilst, at this stage, the parties were “debating” the character of the amount outstanding referrable to the month of May, Fingal was in the process of incurring a further liability by way of damages for mesne profits with respect to its continued occupation during the month of June 2012.
[36] At least, it had access to funds in this amount made available on its behalf by some entity known as L and R Finance Group Pty Ltd.
[37] TB 3/824.
(xviii)On 6 June 2012, Riviera commenced these proceedings (Action No. 794 of 2012) seeking possession of the motel and carpark premises in reliance on its two notices of re-entry.
(xix)On 6 June 2012, the EFT payment in the amount of $45,985.38 received by Riviera was returned (by EFT) to Fingal.
(xx)On 18 June 2012, Riviera served a statutory demand pursuant to s459E(2)(e) of the Corporations Act 2001 on Fingal claiming payment of a debt said to be due in the amount of $141,426.66.[38] The statutory demand was based on a series of unmet tax invoices previously served on Fingal including tax invoice no. 65 for rent outstanding, GST and interest for May 2012.[39]
[38] TB 5/1535.
[39] Tax invoice no. 65 was dated 23 April 2012 and claimed rent due and unpaid for the month of May under both leases together with GST together with interest for late payment as provided for by the terms of the lease. Tax invoice no. 66 was dated 23 April 2012 and claimed reimbursement for various outgoings together with GST and interest. Tax invoice no. 67 dated 23 April 2012 sought recovery of various legal fees incurred by Riviera in taking steps to enforce its rights under the leases together with GST and interest. Tax invoice no. 69 dated 8 June 2012 comprised a claim for rent payable under both leases with respect to June 2012, GST and interest. Ironically, it would seem that Riviera ignored its own rule here insofar as it would appear to have characterised the claim as a claim for rent rather than mesne profits by way of damages for wrongful occupation. Further, a question might arise as to whether such a claim for mesne profits fell due and was payable as at 8 June 2012, that is, in advance of the occupation as a matter of fact for June and in advance of any damage for wrongful occupation having been suffered by Riviera. Arguably, as at the date of the statutory demand (18 June 2012) this debt had not accrued (at least in its full amount). However, this point, to the extent it might have any validity, was never taken. Tax invoice no. 70 dated 8 June 2012 claimed reimbursement for various outgoings for the month of June together with GST and interest.
(xxi)On 9 July 2012, Fingal filed an originating process in this Court (action no. 969 of 2012) seeking to have the statutory demand set aside.
(xxii)On 16 August 2012, Fingal paid the sum demanded, $141,426.66, into Court but in the possession proceedings (action no. 795 of 2012) not the statutory demand proceedings. Argument with respect to Fingal’s application to set aside the statutory demand was heard by a former master of this Court on 17 August 2012. At the commencement of the hearing, the payment by Fingal into Court of the sum of $141,426.66 was drawn to the Master’s attention. The Master ruled that it was not a proper payment into Court and directed that it was to be refunded to Fingal.
(xxiii)On 7 September 2012, the Master delivered reasons for refusing Fingal’s application to have the statutory demand set aside.
(xxiv)On 20 September 2012, Fingal attempted to pay the amount of the statutory demand ($141,426.66) by way of a bank cheque. The bank cheque was provided under cover of a letter from Fingal’s solicitors which described the bank cheque as being “in respect to the payment of the creditor’s statutory demand for payment of debt dated 18 June 2012”. I pause in the chronology, again, to observe that, in the circumstances where Fingal’s attempts to have the statutory demand for the very amount of the cheque set aside had failed, it is difficult to see how anyone, Riviera’s solicitors included, might be concerned that the tender of the cheque would be seen as conditional in some unarticulated way. Nevertheless, the solicitors for Riviera were keen to ensure that Fingal did not, by paying the money due, acquire for itself any sniff of a chance of denying Riviera its legal rights accrued to that point, such as they may have been. The parties’ correspondence bears setting out in full. By its letter of 20 September 2012 the solicitors for Fingal said this (formal parts omitted).[40]
[40] TB 2/460.
We refer to previous communications and now enclose a bank cheque made payable to Riviera Holdings Pty Ltd in the sum of $141,426.66 in respect to the payment of the Creditor’s Statutory Demand for Payment of Debt dated 18 June 2012.
Please acknowledge receipt of this cheque by signing the duplicate copy of this letter and returning such to this office.
The solicitors for Riviera responded by letter dated the same day (and sent by email) in the following terms (formal parts omitted).[41]
[41] TB 2/461.
At 3.10pm today a courier delivered an envelope to my office containing an original and copy letter from your firm dated 20 September 2012 and a cheque (copy original letter and cheque enclosed).
The basis on which the cheque is being proffered is not explained in the letter except by the phrase “…in respect to the payment of the Creditor’s Statutory Demand for Payment of Debt dated 18 June 2012.”
In circumstances where:
1.Your client denied any liability to pay any monies in respect of the Statutory Demand;
2.Your client issued proceedings in Action no. 969 of 2012 to set aside the Statutory Demand;
3.Your client has claimed to have tendered sums of money to my client and to rely upon my client’s refusal to accept those sums because they were not expressly unconditional, as a ground in support of its proceedings in Action no. 795 of 2012 and as a defence in Action no. 795 of 2012;
4.[The Master] found that my client was entitled to refuse to accept the monies (Reasons 7 September 2012 para 37, Action no. 969 of 2012);
5.[The Master] dismissed Action no. 969 of 2012 and ordered your client pay my client’s costs of those proceedings;
6.The last mentioned costs are yet to be paid;
7.The Statutory Demand included amounts owing for rent under tax invoice 65, which are the same amounts and tax invoice referred to in the pleadings in action no. 795 of 2012;
8.Your client maintains a defence of tender in respect of that rent and refers to an alleged tender of that rent, in support of its application for Relief against Forfeiture, in Action no. 795 of 2012;
9.Action no. 795 of 2012 is yet to be determined by the Court;
10.My client proposed a basis on which payments could be made to my client, without prejudice to our clients’ respective positions in the two actions i.e. my letters dated 5, and 6 June 2012 and 2 July 2012;
11.Your client has not responded to the proposed basis or replied at all to my letter dated 2 July 2012;
12.Your letter does not state that the cheque is proffered unconditionally and does not refer to my letter dated 2 July 2012;
it is understandable that my client requires written clarification as to the basis on which the cheque is being offered i.e. that it is:
1.solely in payment of the debts listed and demanded in paragraphs 1 to 5 inclusive of the Schedule to the Statutory demand dated 18 June 2012;
2.the payment is unconditional and may be accepted with a full reservation of my client’s rights;
3.the payment is without prejudice to my client’s rights in respect of Action no. 969 of 2012 and, in particular, in relation to the order for costs made in its favour in that action on 13 September 2012; and
4.the payment is without prejudice to our clients’ respective claims and rights asserted in Action no. 795 of 2012, namely those set out in my client’s Summons, SoC, and Interlocutory application dated 6 June 2012 and your client’s Defence and Counterclaim and Interlocutory application dated 27 June 2012.
Please provide your client’s written confirmation of the last 4 points by return email.
My client does not accept the cheque pending your response.
If your client requires, I will return the cheque forthwith.
My client reserves all of its rights.
By email dated 21 September 2012, the solicitors for Fingal replied in the following terms (formal parts omitted).[42]
[42] TB 2/464.
I refer to your letter of 20 September 2012.
I confirm that in respect of the bank cheque forwarded to you by courier yesterday:
1.The cheque is solely in respect of the payment of the debts listed and demanded in paragraphs 1 to 5 of the schedule to the statutory demand dated 18 June 2012.
2.The payment is unconditional and may be accepted with a full reservation of the rights of Riviera Holdings Pty Ltd.
3.The payment is without prejudice to any rights of Riviera Holdings Pty Ltd in respect of Action 969 of 2012 and in particular to the order for costs made in its favour in that action on 13 September 2012; and
4.The payment is without prejudice to the respective claims and rights asserted by Riviera Holdings Pty Ltd in Action number 795 of 2012 namely those set out in the summons, statement of claim and interlocutory application dated 6 June 2012 and the defence, counterclaim and interlocutory application of Fingal Glen Pty Ltd dated 27 June 2012.
I interpolate the following. Fingal had the capacity to pay the amount of the statutory demand ($141,426.66) as at 16 August 2012, that is, the date it paid this amount into Court. However, Riviera remained unwavering with its agenda of obtaining payment of all funds due to it but also preserving to the maximum its legal capacity to rid itself of this tenant. It is apparent from this and other correspondence between the parties that for whatever reason, Riviera wanted Fingal out even if rent and outgoings were to be brought up to date.
(xxv)On 2 October 2012, Fingal paid to Riviera by bank cheque a further amount of $56,945.11. This was in purported payment of the “rents” (including GST) for the month of July 2012. The solicitors for Fingal, apparently having come to understand what was now required of them, confirmed the basis of the tender as follows.[43]
[43] TB 5/1585.
I confirm that the bank cheque is forwarded to you on the following basis:
1.The payment is unconditional and may be accepted with a full reservation of the rights of Riviera Holdings Pty Ltd.
2.The payment is without prejudice to the respective claims and rights asserted by Riviera Holdings Pty Ltd in Action number 795 of 2012 namely those set out in the summons, statement of claim and interlocutory application dated 6 June 2012 and the defence, counterclaim and interlocutory application of Fingal Glen Pty Ltd dated 27 June 2012.
Alas and alack, the solicitor for Fingal had put his foot in it again. The letter prompted the following response, by email dated 2 October 2012 at 7.41pm, from the solicitors for Riviera (formal parts omitted).[44]
[44] TB 5/1591.
I refer to your letter dated 2 October 2012, delivered by courier at 4.05 pm today, which enclosed a bank cheque drawn in favour of my client in the sum of $56,946.11 (copies enclosed).
Whilst the letter contains 2 paragraphs to the effect that the cheque is forwarded unconditionally, with a full reservation of my client’s rights and without prejudice, it also contains the statement “Please find enclosed a bank cheque payable to Riviera Holdings Pty Ltd …in respect of the rent payable under the leases (including GST) for the month of July 2012.”
As was stated in my letter dated 5 June 2012:
11.The Notices of Re-entry that were served on your client at the premises at 31-34 North Terrace, Adelaide, yesterday afternoon, record that my client has re-entered the premises and that the leases have been determined.
12.Any monies which are paid to my client after the service of the Notices of Re-entry only be by way of reduction of the amounts owing to it as debts under the former leases, or in diminution of its claim for damages following re-entry.
13.In the absence of an acknowledgment by your client that the deposit be applied in the foregoing manner, it will not be accepted by my client and, as in the case of other unauthorised payments, will be returned.
14.It is not open for your client to pay any monies to my client on the basis that those payments maintain the existence of the leases and are to be credited to ongoing amounts due under the leases.
My client identified a basis on which payments could be made under our clients’ respective positions in my letter dated 2 July 2012 i.e.
“Further amounts which would have been payable by your client as rent and outgoings under the former leases (on my client’s case) will be accepted on a similar basis, i.e. specifically identified as payments of a particular character, approved by my client, payment accepted, without prejudice to our clients’ respective rights.”
The proffer of payment of monies as “…rent payable under the leases…” is a condition which is inconsistent with my client’s pleaded case and cannot be accepted on that basis.
Please reword the phrase in your letter so that it is consistent with my previous correspondence or alternatively withdraw it entirely.
A second page of this email has not been reproduced in the Court trial book but the gist of the letter remains evident.
(xxvi)On 4 October 2012, the solicitors for Riviera emailed a follow up communication. Just in case the solicitors for Fingal did not have a full appreciation of the problem and the difference, at law, between the notion of “rent” and the notion of, as the solicitors for Riviera described it “mesne rent and damages following re-entry” the distinction was explained again in the follow up correspondence.[45]
[45] TB 5/1593.
1.I refer to my emails sent Tuesday 2 October 2012, to which I have not received a reply.
2.As stated in the longer of my 2 emails, my client cannot accept money from Fingal which is proffered on a basis which either explicitly or implicitly presupposes that the 2 leases continue in existence and that the payments are to be credited to ongoing amounts due under the leases.
3.My client can accept money from Fingal simply by way of reduction of amounts owing to it i.e. in diminution of its claim for mesne rent and damages following re-entry, without prejudice to your client’s claim that my client should not be entitled to an order for possession because your client should have the benefit of relief against forfeiture.
4.In the absence of a withdrawal of the statement that the cheque enclosed in your letter dated 2 October 2012 is “…in respect of rent payable under the leases…” and an acknowledgement that it is proffered on the basis identified in para 3, herein, my instructions are to return the cheque in this afternoon’s mail.
By return email of 4 October 2012, the solicitors for Fingal responded in an effort to put the concerns raised by the solicitors for Riviera to rest and in the following terms (formal parts omitted).[46]
[46] TB 5/1594.
I refer to:
1.The letter from DBH Commercial Lawyers dated 2 October 2012 enclosing a bank cheque payable to Riviera Holdings Pty Ltd in the sum $56,945.11;
2.Your email of 2 October 2012 received at 7.41pm; and
3.Your email received at 1.01pm today.
The cheque is tendered to your client by Fingal Glen Pty Ltd on the following basis:
1.The payment is unconditional and may be accepted with a full reservation of rights by Riviera Holdings Pty Ltd.
2.The payment is without prejudice to the claims and rights asserted by Riviera Holdings Pty Ltd in action number 795 of 2012, namely those set out in the summons, statement of claim and interlocutory application dated 6 June 2012.
3.Riviera Holdings Pty Ltd may choose to accept the payment tendered by way of reduction of amounts owing to it including in diminution of its claim for mesne rent and damages following re-entry but if Riviera Holdings Pty Ltd accepts the payment on that basis, it is without prejudice to the claim by Fingal Glen Pty Ltd for relief against forfeiture of the leases in the above proceedings.
Any assertions or statements set out in our letter of 2 October 2012 and referred to above which are inconsistent with the matters set out in this letter are unconditionally withdrawn.
(xxvii)By letter dated 9 October 2012, the solicitors for Riviera provided to the solicitors for Fingal a schedule of all amounts said to remain unpaid as at 1 October 2012 after having allowed credit for the amount of $141,426.66 paid on or about 20 September 2012 and the amount of $56,945.11 paid on or about 2 October 2012. The letter of 9 October 2012[47] enclosed a summary schedule together with individual monthly schedules[48] which showed a balance due (inclusive of GST) and which remained unpaid as at 1 October 2012 of $225,766.14. This figure also included legal fees and interest purportedly calculated in accordance with the requirements of the lease and embraced amounts outstanding with respect to July, August, September and October 2012. Again, a claim with respect to damages by way of mesne profits for wrongful occupation throughout October 2012 was included in advance of that occupation.
[47] TB 5/1601.
[48] TB 5/1602-1606.
(xxviii)On 18 October 2012, Fingal paid Riviera by way of bank cheques the further sums of $57,483.92 representing the equivalent of one month’s “rent” and $538.81 covering a shortfall for the 2 October 2012 payment with respect to “rent” for July 2012.[49]
[49] The letter from Fingal’s solicitors which enclosed these two bank cheques and provided the explanation for the basis upon which they were tendered is annexure A to exhibit P2A.
(xxix)On 2 November 2012, the Deputy Commissioner of Taxation commenced winding up proceedings against Fingal.[50] These proceedings were based on the failure by Fingal to comply with a statutory demand served on it by the Deputy Commissioner of Taxation. The statutory demand was dated 13 August 2012 and claimed a total amount due to the Deputy Commissioner of Taxation of $557,713.37.[51]
[50] TB 5/1635.
[51] TB 5/1637.
(xxx)Under cover of letter dated 8 November 2012,[52] and couriered to the solicitors for Riviera, the solicitors for Fingal provided a bank cheque in the sum of $167,743.41. This amount together with the amounts of $57,483.92 and $538.81 paid on or about 18 October 2012 totalled $225,766.14, being the balance due and claimed by Riviera as at 1 October 2012. At this point Fingal was up to date with respect to all moneys due and payable to Riviera to the end of October 2012. However, “rents” and outgoings for November 2012 (assuming still payable in advance) were seven days overdue.
[52] Annexure B to P2A.
(xxxi)On 9 November 2012, a master of this Court made orders for summary judgment and granted declaratory relief in favour of Riviera with respect to its application for possession of the premises following upon its re-entry on 4 June 2012 for the non-payment of the May 2012 rent. The material parts of the first three orders made by his Honour[53] are in the following terms.
[53] TB 5/1683.
1.The defendant, Fingal Glen Pty Ltd, give the plaintiff, Riviera Holdings Pty Ltd, possession [of the land] within three days of the service of a copy of this order…
2.The plaintiff re-entered into and upon the land in the name of the whole on 4 June 2012 and has since that date been entitled to have, possess and enjoy the same as of its former estate as the registered proprietor thereof with the effect that registered leases… absolutely ceased and determined on 4 June 2012.
3.Judgment to be stayed until further order.
His Honour also dismissed Fingal’s interlocutory application seeking summary judgment on its claim for relief against forfeiture of the leases on the basis that this was an issue that should go to trial.
(xxxii)On 15 November 2012, the Master made further orders staying the earlier judgment but with conditions.[54] In effect, Riviera’s judgment for possession (order 1 above) was stayed provided that Fingal continued to pay, in accordance with a court imposed timetable, rent and outgoings otherwise payable under the terms of the forfeited leases for the months of November and December 2012 and January and February 2013. A timetable was put in place to enable an early trial of Fingal’s counterclaim seeking relief against forfeiture, to commence on 29 January 2013.
[54] TB 5/1685.
(xxxiii)On 19 November 2012, Fingal paid the “rent” and outgoings (inclusive of GST) interest and late payment fee with respect to the month of November by bank cheque.[55]
[55] Tax invoice no. 87 issued on 15 November 2012 is annexure C to P2A and a copy of a bank cheque in the amount of $69,631.23 in payment thereof together with a copy of the receipt for that payment provided by Mr Economos is annexure D to P2A. It should be noted that notwithstanding that the forfeited leases called for payment on the first day of the month, the order of the master called for payment of the November invoice by 19 November 2012 which order was complied with.
(xxxiv)There was a hiccough with the payment of the December amounts. On 1 December 2012, tax invoice no. 88[56] was issued by Riviera in compliance with the Master’s order claiming rent and outgoings for December 2012 (inclusive of GST) in the sum of $83,660.94. The order called for payment of this invoice by way of tender of bank cheque on 5 December 2012. What follows is my summary of how I saw the matter unfold. It would be unfair to describe it as common ground. There was some administrative laxity or confusion on the part of Fingal (in particular, on the part of its director Mr Buff, who is located in Melbourne, and its solicitors). As a result of this, whilst it would seem that the funds were available to pay the December invoice the payment date of 5 December was not met. In a flurry of activity by the solicitors for Fingal, attempts were made to persuade Riviera to accept payment in a manner otherwise than as required by the Master’s order and, ultimately, two days late. The solicitors for Riviera refused to allow any accommodation to Fingal for what appeared to be an administrative mix-up between Fingal and its solicitors (albeit a rather foolish one). As a result, on 7 December 2012, Fingal had no choice but to bring an application in this Court to seek a variation of the Master’s orders so as to avoid the consequences of a perceived automatic vacation of the stay. Affidavits of some substance were filed and the matter was called on as a matter of urgency before a judge of this Court (me). Counsel and solicitor appeared for Fingal, senior counsel and solicitor appeared for Riviera and debate ensued. The debate had an air of unreality about it because, from the outset, the Court was advised that the solicitor for Fingal was in possession of a bank cheque payable to Riviera in the amount of $83,660.94 which Riviera had refused to accept in discharge of the relevant court order.During the debate the issue arose as to whether or not the Court had power to vary the orders of the Master given that their self-executing nature probably meant that, in the absence of payment of the December invoice by 5 December 2012, the stay had been vacated. Accordingly, the debate transmogrified into an oral application by Fingal for a further stay on conditions which I granted. I made a series of orders in support of the new stay which orders essentially replicated those previously made by the Master[57] and the cheque for the December invoice was delivered two days late.[58]
[56] Annexure E to P2A.
[57] TB 5/1689.
[58] The tax invoice for the December rent and outgoings is annexure E to P2A and a copy of the bank cheque in the sum of $83,660.94 dated 7 December 2012 is annexure F to P2A.
(xxxv)On 3 January 2013, tax invoice no. 89[59] in the amount of $57,864.95 (including GST) representing the amounts due for January 2013, was paid in full by Fingal by way of bank cheque.[60]
(xxxvi)On 14 January 2013, Fingal paid $60,000 towards the ATO debt.[61]
(xxxvii)On 18 January 2013, Fingal paid $125,000 towards the ATO debt.[62]
(xxxviii)Rents and outgoings with respect to February 2013, in the amount of $94,863.98 (inclusive of GST) were paid on time in accordance with the Court order.[63]
(xxxix)On 29 January 2013, I commenced to hear the trial of Fingal’s claim for relief against forfeiture. The matter was adjourned part heard at the end of Friday 1 February 2013, to resume 27 February 2013. On that day I heard submissions and reserved my judgment.
(xl)On 13 February 2013, Fingal paid $120,000 towards the ATO debt.[64]
(xli)As at 27 February 2013 (the date I first reserved judgment) it was common ground that Fingal remained up to date with respect to all monies claimed by and then due and payable to Riviera.
(xlii)Also on 27 February 2013, Fingal paid (early), by EFT, invoice no. 91 representing “rents” and outgoings with respect to March 2013 in the amount of $57,864.95.[65]
(xliii)On 8 March 2013, Fingal was ordered to be wound up in insolvency under the provisions of the Corporations Act 2001 with Clyde Peter White, an official liquidator, appointed as the liquidator of the company. The petitioning creditor was the ATO.
(xliv)On 15 April 2013, Riviera succeeded with an application (not opposed by Fingal) to re-open its case so as to tender the orders of Registrar Luxton of the Federal Court of Australia dated 8 March 2013.[66] Neither party sought to re-open their respective cases in order to update the Court on the topic of whether or not “rents” and outgoings for the month of April had been paid. If there has been a problem with either the April or May invoices, I have little doubt that Riviera would have made a further application to re-open. It has not done so.
[59] TB 2/488.
[60] Fifth Buff affidavit paragraph [3] at TB2/476.
[61] Fifth Buff affidavit at [21] TB 2/479.
[62] Fifth Buff affidavit at [21] TB 2/479.
[63] Tax invoice no. 90 is annexure G to P2A and a copy of the bank cheque made payable to Riviera for $94,863.98 is annexure A to P2A.
[64] Exhibit P23.
[65] Exhibit P25.
[66] Exhibit D42.
Relief against forfeiture of a leasehold estate – general principles

Part 1 of the Landlord and Tenant Act 1936[67] confers statutory jurisdiction on this Court, in the circumstances there described, to grant relief against forfeiture of a leasehold interest when the forfeiture has been effected as a result of non-payment of rent or non-compliance by the lessee with other lease covenants. However, the jurisdiction thereby conferred does not operate at the expense of or to the exclusion of the inherent jurisdiction of this Court sitting as a court of equity to relieve against penalties and forfeitures. By Fingal’s second counterclaim filed on 17 October 2012 it seeks an order for relief without, either in the prayers for relief or in the pleading itself, identifying the jurisdictional basis relied upon. Riviera has submitted that, in the circumstances of this matter (in particular, as a consequence of the orders made by the Master on 24 October 2012 dismissing Fingal’s interlocutory application seeking relief pursuant to s9 of the Landlord and Tenant Act) the jurisdiction conferred by the Landlord and Tenant Act is no longer available to Fingal.
[67] Sections 4 to 12.
Nevertheless, it is clear from the reasons of the Master that Fingal’s application to be granted relief “in a summary manner”[68] was refused on the basis that there were sufficient factual disputes between the parties to require a trial of Fingal’s second counterclaim seeking relief. Accordingly, his Honour ordered an early trial of this issue. Whether or not jurisdiction under Part 1 of the Landlord and Tenant Act is still available for the purpose of this matter does not need to be determined. It is common ground that the statutory jurisdiction is, in general terms, co-extensive with the inherent jurisdiction of the Court which jurisdiction has not been excluded or otherwise diminished by conferral on this Court of the statutory jurisdiction.
[68] See the language of s9 of the Landlord and Tenant Act.
The starting point in understanding the equitable approach to applications for relief against forfeiture of a leasehold interest is the well known statement of Lord Wilberforce in Shiloh Spinners v Harding[69] which has repeatedly been referred to with approval by courts in this country.[70]
[69] [1973] AC 691 at 722. Viscount Dilhorne and Lords Pearson, Simon and Kilbrandon agreed with the speech of Lord Wilberforce, although Viscount Dilhorne and Lord Simon each provided supplementary remarks.
[70] I need refer only to High Court authority. See for example, Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406 at [19] (Gibbs CJ and Murphy J) and [14] (Brennan J), O’Dea v Allstates Leasing System (WA) Pty Ltd [1983] HCA 3; (1983) 152 CLR 359 at [18] (Brennan J), AMEV-UDC Finance Ltd v Austin [1986] HCA 63; (1986) 162 CLR 170 at [5] (Deane J), Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489 at [20] (Mason CJ), [11] and [16] (Brennan J), [12] (Deane and Dawson JJ), Esanda Finance Corporation Ltd v Plessnig [1989] HCA 7; (1989) 166 CLR 131 at [9] (Brennan J) and Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; (2003) 217 CLR 315 at [100]-[101] (Kirby J).
There cannot be any doubt that from the earliest times courts of equity have reserved the right to relieve against forfeiture of property. The jurisdiction has not been confined to any particular type of case. The commonest instances concern mortgages, giving rise to the equity of redemption, and leases, which commonly contain re-entry clauses; but other instances are found in relation to copyholds, or where the forfeiture was in the nature of a penalty. Although the principle is well established, there has undoubtedly been some fluctuation of authority as to the self-limitation to be imposed or accepted on this power. There has not been much difficulty as regards two heads of jurisdiction. First, where it is possible to state that the object of the transaction and of the insertion of the right to forfeit is essentially to secure the payment of money, equity has been willing to relieve on terms that the payment is made with interest, if appropriate, and also costs (Peachy v Duke of Somerset (1721) 1 Stra 447 and cases there cited). Yet even this head of relief has not been uncontested; Lord Eldon LC… expressed his suspicion of it as a valid principle, pointing out, in an argument which surely has much force, that there may be cases where to oblige acceptance of a stipulated sum of money even with interest, at a date when the receipt had lost its usefulness, might represent an unjust variation of what had been contracted for… . Secondly, there were the heads of fraud, accident, mistake or surprise, always a ground for equity’s intervention, the inclusion of which entailed the exclusion of mere inadvertence and a fortiori of wilful defaults.
Outside of these there remained a debatable area in which were included obligations in leases such as to repair and analogous obligations concerning the condition of property, and covenants to insure or not to assign.
In Tanwar Enterprises Pty Ltd v Cauchi[71] Kirby J said this.
Meantime, in England in Shiloh Spinners Ltd v Harding, Lord Wilberforce had set out two heads of the jurisdiction to relieve against forfeiture of property. His speech appeared to reflect something of a return to the large view of intervention that equity had asserted before the Privy Council decisions in Steedman and Brickles. Thus, Lord Wilberforce acknowledged the existence of the jurisdiction to relieve against forfeiture.
First, where it is possible to state that the object of the transaction and the insertion of the right to forfeit is essentially to secure the payment of money, equity has been willing to relieve on terms that the payment is made with interest, if appropriate, and also costs… Secondly, there were the heads of fraud, accident, mistake or surprise, always a ground for equities intervention, the inclusion of which entailed the exclusion of mere inadvertence and a fortiori of wilful defaults.
This re-statement of equity’s beneficent role was influential in the shift in doctrine in the trio of Australian cases that followed Shiloh Spinners. It was a shift consciously made, repeatedly upheld and applied since in countless decisions. It was not challenged in this appeal.
[71] At [100]-[101].
Fingal’s claim for relief against forfeiture falls within the first category identified by Lord Wilberforce. The only basis upon which Riviera re-entered and forfeited the leases was the non-payment within time of the rents due and payable for May 2012. Again, it is common ground that the principles relevant to relief against forfeiture for unpaid rent are distinct from those applicable to relief against forfeiture for breach of other covenants of a lease and potentially provide a more favourable environment for the application of the doctrine of relief against forfeiture as far as a tenant is concerned.
The basic approach to an application for relief against forfeiture of a lease based on non-payment of rent is well understood. An authority commonly referred to and relied upon in this country, and notwithstanding that it dates to a time before Shiloh Spinners, is that of Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW Ltd.[72] In that case Hope J said this.
It is well established that the practice of the Court in exercising its jurisdiction to grant relief against forfeiture for non-payment of rent is that it generally regards the power to re-enter or forfeit for non-payment of rent as a security for the rent, and provided the lessor and other persons concerned can be put in the same position as before the forfeiture or re-entry, the lessee is entitled to be relieved against forfeiture upon payment of rent, costs and, in appropriate cases, of interest and of other expenses to which the lessor may have been put. … Despite these general statements, it is clear that the lessee is not entitled to relief as of right, and that the Court has a discretion in the matter, even though it may only be in very special circumstances in which relief will be refused.
There are numerous, more recent, authorities which have adopted this statement by Hope J as a starting point when considering an exercise of the discretion to relieve against forfeiture for non-payment of rent.[73]
[72] (1970) 2 BPR 9562 (NSWSC).
[73] For example, Cicinave Pty Ltd v Jasco Pty Ltd (1989) 5 BPR 11,139 (NSWSC), Tannous v Cipilla Bros Holdings Pty Ltd (2001) 10 BPR 18,563, Wilkinson v S & S Gikas Pty Ltd (2006) 12 BPR 23,685; [2006] NSWSC 1314, Tutita Pty Ltd v Ryleaco Pty Ltd (1989) 4 BPR 9635; (1989) NSW ConvR 55-486, Wynsix Hotels (Oxford St) Pty Ltd v Toomey [2004] NSWSC 236. See also, for the identification of a number of the factors that can be relevant to an exercise of this discretion and generally, Young J in Hayes v Gunbola Pty Ltd (1986) 4 BPR 9247; (1988) NSW ConvR 55-375, Jam Factory Pty Ltd v Sunny Paradise Pty Ltd [1989] VR 584, Kelly & Anor v The Alternative Web Pty Ltd [2010] SASC 4.
Shiloh Spinners, itself, concerned a failure to comply with lease covenants other than for payment of rent, that is, the second category of relief identified by Lord Wilberforce and with respect to which more onerous requirements might obtain. However, in the case of forfeiture for non-payment of rent the discretion to grant relief is wide and unfettered. As a matter of practice, if the tenant pays all arrears and the expenses to which the landlord has been put, relief ordinarily will follow. Sometimes it has been put that, in such a case, it will only be in “exceptional”, “special” or “very special” circumstances that relief will be refused.
Ultimately, the description of the jurisdiction given by Lord Wilberforce and as re-stated in leading property texts, albeit with its high level of abstraction, might be seen as the most helpful. Given that a right of re-entry is merely security for payment of the rent, equity will grant relief if:
(i)the tenant has brought the rent up to date;
(ii)the tenant has paid any expenses to which the landlord has been put; and
(iii)it is just and equitable to grant relief.[74]
[74] See Commercial Tenancy Law 3^rd ed 2009, LexisNexis Butterworths Australia, Bradbrook Croft and Hay at [19.1].
The large body of case law dealing with relief against forfeiture for non-payment of rent (to much of which I was referred during submissions) reveals many considerations potentially relevant to the proper exercise of the discretion. However, as Lord Simon observed in Shiloh Spinners,[75] “what have sometimes been regarded as fetters on the jurisdiction are … more properly to be seen as considerations which the court will weigh in deciding how to exercise an unfettered discretion”.
[75] [1973] AC 691 at 726.
Being an appeal to principles of equity for relief against the rigours of the common law, the usual maxims of equity such as he who seeks equity must do equity and he who comes to equity must come with clean hands may have work to do in particular cases.
Fingal’s current financial position
Before dealing with the more important factors relied on by the parties as militating for or against a favourable exercise of the discretion, I should first summarise, briefly, Fingal’s current financial position and, by reference thereto, its capacity to meet any future payment obligations under the leases.
The evidence for this is essentially that of Mr Buff as set out in his affidavits read in Fingal’s case and in Mr Buff’s cross-examination, together with the documentary evidence tendered concerning the business affairs of Fingal and its associated entities. Mr Buff and Mr Hammond are the controlling minds of a number of corporate entities (together with associated trust vehicles) each of which operates a motel business. At the time of the trial, Fingal operated the Comfort Hotel Adelaide Riviera (the premises the subject of the present litigation) Martlyn Pty Ltd operated the Belltower Comfort Motor Inn at Ballarat and other companies with associated trusts operated the Comfort Resort Echuca Motel at Moama and the Country Comfort Motel at Mount Gambier.
The affairs of the four motels appear to have been managed in a practical manner, essentially to serve the convenience of Mr Buff and Mr Hammond and as if the affairs were being run on behalf of a single group or entity. To be fair to Mr Buff, the evidence concerning the financial affairs of each of the companies with which he and Mr Hammond are involved and provided to the Court was in no way complete; after all it is only the financial affairs of Fingal that are of direct relevance to this litigation. Nevertheless, it was part of Fingal’s case that, to the extent that Fingal might find itself in financial difficulty, it was able to draw on the support from time to time of other entities in the group.
Whilst each of the entities, it would seem, has been under severe financial pressure of recent times,[76] each has had access to a cash flow from the running of its motel business potentially available to assist another entity in the group. From an outsider’s perspective, the impression given by Mr Buff in his evidence, was that the financial affairs of each entity in the group were managed in somewhat of a haphazard manner and that the respective corporate veils were rather permeable. Intercompany loans and injections of capital by Mr Buff or Mr Hammond and from family members were both not infrequent and not well documented.
[76] Indeed, during the trial the Court received some information concerning the attempts by Martlyn Pty Ltd to fend off its own creditor initiated winding up proceedings.
It is not possible on the limited evidence available to make detailed findings about the financial capacity of each entity in the group. However, I am satisfied that the group as a whole appears to be in significant financial difficulty. A recent attempt to refinance the group’s operations with the National Australia Bank was put on hold essentially because of Fingal’s pending (now actual) liquidation and because of similar problems confronted by Martlyn Pty Ltd.
The Court has received minimal evidence, and none that I regard as of any assistance, concerning the financial position of the other entities in the group, Mr Buff himself, Mr Hammond or any family member who, according to Mr Buff, might be willing to assist by way of an injection of capital into Fingal.
A fundamental issue, relevant to the exercise of the discretion in this case, is whether the Court can be sufficiently confident that Fingal will continue to be in a position, from a financial perspective, to meet its payment obligations under the leases should they be reinstated. In this respect, I place minimal weight on the possibility of assistance from other entities in the group, from Mr Buff personally or from Mr Hammond personally or from any members of their respective families. In any event, the likelihood of further “capital injections” being made by associated companies or family members has become even more remote, now that Fingal is in liquidation. Martlyn Pty Ltd, apparently has an unsecured loan from Fingal in the amount of $400,000. However, on the evidence available concerning Martlyn’s financial affairs, I cannot have any confidence at all that Fingal’s liquidator would succeed with calling in that loan. The only financial wherewithal that I am prepared to accord any significant weight on the question of Fingal’s capacity to pay in the future, is that reflected in its own trading, as proprietor of the Comfort Hotel Adelaide Riviera.
The evidence, even in this respect, is not easy to assess. Fingal produced a number of different sets of financial statements each prepared with different purposes in mind. On their face, they show inconsistencies in terms of total income said to have been received for a particular financial year and total expenses said to have been incurred for a particular financial year. Some of the discrepancies were explained by Mr Buff and some were not. Counsel for Riviera, in this respect and generally, pursued a sustained attack on Mr Buff’s credibility and reliability during cross-examination and with some success. Mr Buff as well as being a director of Fingal was by profession, an accountant. He assumed responsibility for the financial accounts as signed off although others under his control prepared the accounts.
In fairness to Mr Buff, there is something to be said for proposition that the nature of and detail contained within a particular set of accounts will vary according to the purpose. To take one example, financial accounts produced in order to assist a prospective purchaser who might wish to buy the business, as a general rule, will not include certain expenses said to be peculiar to the existing operating entity (for example interest expense on loans). As such, accounts prepared for this purpose, ordinarily, will show a greater figure for nett income (total income less total expenses) than would, for example, accounts prepared for taxation purposes. In the latter, it can usually be expected that income will be minimised to the extent legally permissible and expenses will be maximised to the extent legally permissible.
The most conservative figures provided in evidence by Fingal are those as summarised in the following table. According to Mr Buff, it was these figures that formed the basis of tax returns lodged on behalf of Fingal from which I infer that the figures are likely to be as conservative in terms of a maximisation of expenses and a minimisation of taxable income as was legally permissible.[77]
[77] The various profit and loss statements from which this table has been derived are at TB 1/131-132 and 2/490 and 2/494-495.

Year

Total Income

Total Expenses

Net Income

30 June 2010

3,100,026.82

2,602,898.67

236,379.97

30 June 2011

2,738,778.91

2,414,016.52

150,585.86

30 June 2012

2,840,766.65

2,450,975.58

234,162.96

31 December 2012 (actual)

1,360,290.70

1,215,965.04

84,174.22[78]

30 June 2013 (projected)

2,691,114

2,457,687

233,427

[78] During cross-examination of Mr Buff, it became apparent that this figure was overstated. For this reason alone, the “projected” Net Income for 30 June 2013 is also likely to be overstated.

It can be said that whilst Fingal has had a significant cash flow over recent years it also has had significant demands on its cash flow. A question before the Court is whether there is a serious risk that Fingal will not be able to perform its financial obligations owed to Riviera in the future, given the demands on Fingal in connection with all of the other expenses necessarily involved in running the motel. In Wilkinson v S & S Gikas Pty Ltd,[79] Campbell J expressed this notion as a disentitling factor (see below).
Factors relied upon by Fingal in respect of its claim for relief against forfeiture
[79] (2006) 12 BPR 98, 207; [2006] NSWSC 1314 at [24].
Fingal’s remedy of the breach relied upon for the forfeiture and its capacity to pay in the future
Relief against forfeiture for non-payment of rent is granted, almost as of course, in circumstances where all arrears have been paid and other expenses and costs incurred by the landlord as a result of the breach have been met. As a matter of practice, it would seem to be relatively rare that relief is not granted in such a case. Whilst there is no entitlement to relief as of right, many of the authorities are to the effect that only “in exceptional circumstances” or “very special circumstances” will relief not be granted in such a case.[80]
[80] See generally, Jam Factory Pty Ltd v Sunny Paradise Pty Ltd [1989] VR 584 at 590, Kelly and Anor v The Alternative Web Pty Ltd [2010] SASC 4 at [72]-[76], Hayes v Gunbola Pty Ltd (1988) 4 BPR 9247; (1988) NSW ConvR 55-375, Tutita Pty Ltd v Ryleaco Pty Ltd (1989) 4 BPR 9635; (1989) NSW ConvR 55-486, Lo Guidice v Biviano (No 2) [1962] VR 420, Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW Ltd (1970) 2 BPR 9562.

In Wilkinson[81] Campbell J provided the following summary of the relevant principles.
The granting of relief against forfeiture is discretionary. In relation to a lease, the principle that is generally applied is that the power to re-enter or forfeit for non-payment of rent is regarded as being in substance security for the rent. Provided the lessor and other persons concerned can be put in the same position as before the forfeiture or re-entry, the Court will usually grant relief against forfeiture upon payment of rent costs, interests and other expenses… . If those terms are offered, it is only in a rare case that the Court would refuse relief against forfeiture. The principle on which that is done is that, once the landlord has got all that the right of re-entry was, in equity’s eyes, security for, it would be unconscionable for the landlord to insist on its legal right to re-enter.
However, such a rare case can occur if the tenant is unable to pay future rent, or may reasonably be expected to become so… . If there is a sufficiently serious risk that the tenant will not be able to perform its obligations in the future, it may be that the consequence is that it is not unconscionable for the landlord to insist on its strict legal right.
[81] (2006) 12 BPR 23,685; [2006] NSWSC 1314 at [23]-[24].
As matters set out in paragraph [8] above demonstrate:
(i)the outstanding rents for May 2012 (upon which the forfeiture and re-entry was based) and June 2012 and the outstanding outgoings for May and June were paid by Fingal on 21 September 2012 (at the latest);[82]
(ii)by 18 October 2012, all rent, outgoings, interest and legal fees claimed as due in accordance with the terms of the leases for the months of July, August, September and October 2012 had been paid by Fingal;[83] and
(iii)thereafter, that is, for the months of November 2012 through to the end of the trial all amounts due for rent and outgoings have been met by Fingal in accordance either with a court ordered timetable[84] or, once the timetable ceased to operate, in accordance with the requirements of the leases. There is no reason to find that Fingal has not continued to so comply since the end of the trial. In short, Fingal remains in compliance with its payment obligations under the leases.
[82] See paragraph [8] (xx) and (xxiv).
[83] See paragraph [8] (xxvii)-(xxx).
[84] Apart from the December hiccough identified earlier.
It is true that there has been a very long history of irregular and late payments of rent and outgoings under the leases.[85] In his evidence, Mr Buff at first tried to maintain that the delays in payment were not as great or as often as is demonstrated by the document headed “Riviera Motel Rent Invoiced Payment Schedule” adduced in evidence by Riviera.[86] In this respect, Mr Buff referred to dates, as disclosed in Fingal’s records, when a cheque for rent and outgoings had been posted or delivered to Riviera. Of course, cheques take time to clear and the provision of a cheque on the first of a month does not satisfy the obligation to pay the rent on the first of the month. Furthermore, as the schedule provided by Mr Economos shows, Fingal was repeatedly late in paying the monthly rent and outgoings to an extent much greater than might be explained even by Mr Buff’s protestations.
[85] See paragraph [8] (v) above.
[86] Exhibit NE1 to the second Economos affidavit, TB 3/976.
Mr Buff was cross examined at length on his approach to the timely payment by Fingal of monthly rent and outgoings. It is unnecessary to review this topic in any detail. I am satisfied that, for whatever reasons, Fingal has for quite some time now been suffering significant cash flow difficulties. I have little doubt that Fingal did, and perhaps had little choice but to, play ducks and drakes with Riviera and probably also with other trade creditors in an effort to manage its cash flow difficulties. It has been submitted on behalf of Riviera, that Fingal’s repeated breaches of the leases with respect to its obligations to make timely payment of rent and outgoings should be characterised as wilful and that the wilfulness of its conduct, in this and other respects, should be a consideration that weighs heavily against the exercise of the discretion to grant relief. Where the breach relied on is non-payment of rent, the fact of wilfulness is to be taken into account when considering whether or not it is equitable to give relief but, again, it is not a conclusive factor.
The fact of wilfulness will be taken into account… but relief may be given whether or not there was past wilful conduct or whether or not the tenant may be still in financial difficulties.[87]
[87] Hayes v Gunbola (1988) NSW ConvR 55-375; (1986) 4 BPR 97, 263 at 9250 (Young J).
I accept that there may well have been a deliberate strategy in the past on the part of Fingal to delay payments from time to time. However, in my view, this more than likely was an effort to buy time as a result of the financial pressures Fingal was under rather than a deliberate attempt to avoid paying rent and outgoings entirely or to deny Riviera its entitlements under the lease. Fingal’s conduct was not wilful in this sense. Fingal’s past behaviour in this respect has been characterised by Riviera as a lack of clean hands and as unconscionable behaviour and as, of itself, a disentitling factor. In my view, whilst a relevant consideration, it is only one of many relevant considerations. Its greater relevance is as to the extent to which such past conduct might bear on the question of Fingal’s capacity and willingness to pay future rent and outgoings as and when they fall due.
In this respect, the directors of Fingal provided a written undertaking in the following terms.[88]
Fingal Glen Pty Ltd… in its own capacity and as trustee of the Adelaide Riviera Investment Trust hereby undertakes to Riviera Holdings Pty Ltd… to:
1. pay to Riviera Holdings Pty Ltd the legal costs and expenses incurred by Riviera Holdings Pty Ltd attributable to the forfeiture; and
2. meet Fingal Glen Pty Ltd future obligations as to rent and outgoings under the terms of the leases.
The undertaking was dated the 23 January 2013 and apparently executed on behalf of Fingal Glen Pty Ltd in accordance with s127(1) of the Corporations Act 2001.
[88] TB 2/687. See also the first Buff affidavit paragraph 10.8 at TB 1/59.
Such an undertaking (made to another party) is, at best, an expression of contrition and goodwill. It adds little, if anything, to the binding obligations Fingal would assume, in any event, should relief be granted and the leases re-instated. In my view, the Court (and Riviera) can take greater comfort from the fact that the directors of Fingal have been put to a very difficult, very expensive and very hard fought process in seeking to have the leases re-instated. I infer from Mr Buff’s evidence on the topic and from their having committed themselves to this process, that Mr Buff and Mr Hammond hold at least an expectation that Fingal will be able to make further payments on time and that they intend to do all in their power to facilitate this. Any rational director in their position must realise that whilst the courts are strongly inclined to grant relief for non-payment of rent the first time it is sought, the chance of succeeding with a second application, at least where the breach is the same (such as non-payment of rent), is very much reduced. Such a rational director in the position of Mr Buff and Mr Hammond will realise that in the event relief were to be granted on a first application, Fingal would have little choice but to comply with the terms of the lease as to payment of rent and outgoings thereafter.[89]
[89] Cf; Hayes v Gunbola (1986) 4 BPR 9247 at 9252 (Young J, NSWSC); (1988) NSW ConvR 55-375.
In any event, the significance of such an undertaking and of the attitude of the directors of Fingal, as just now briefly discussed, has largely been overtaken by the fact that Fingal has been in the hands of an official liquidator since 8 March 2013. The affairs of Fingal are now being managed by the liquidator as its agent. I have heard no evidence and know nothing about the liquidator’s plans for Fingal. However, I am aware of the following.
(i)Fingal’s most important asset is the motel business it conducts.
(ii)The value of that asset has been significantly compromised by the fact that, at present, Fingal has no lease and therefore no control over the property from which it conducts that motel business.
(iii)Apart from the motel business itself, the most recent balance sheet for Fingal discloses relatively little by way of realisable assets.[90]
(iv)As far as Fingal’s debt position is concerned, it has a substantial short term debt to the Australian Taxation Office (the petitioning creditor) in the amount of at least $252,713.37 but which could be as high as $385,432.54[91] and a long term debt to its bank in excess of $1.5M.
(v)Speaking in general terms, the liquidator as agent of Fingal has a responsibility to act prudently in an effort to maximise the return from the winding up for the benefit of all creditors (not just the ATO as petitioning creditor) and its members. In this endeavour, the liquidator would appear to have three broad choices: first, to deal with the assets and liabilities as they presently stand and to wind up the company in the immediate to short term; second, to continue to trade on behalf of the company, perhaps indefinitely, with a view to meeting its outstanding debt obligations and returning the company to solvency; and third, to continue to trade until the company is more suitably placed to sell the motel business which would lead to a restoration of solvency or, if not, a winding up. The liquidator will only be able to attempt the second or third strategies in the event that relief were to be granted and the leasehold interests restored to the company. A cursory glance at the latest balance sheet for Fingal will be enough to show that an immediate winding up of the company’s affairs (the first strategy) is likely to produce, at best, an extremely modest return to creditors.[92]
[90] TB 1/135. The Balance Sheet for 30 June 2012 records Total Fixed Assets at $414,679.43.
[91] The evidence on this topic is a little unclear. The ATO statutory demand dated 13 August 2012 claimed a total of $557,713.37. Of this, Fingal has paid $305,000, leaving a balance of $252,713.37. However, Fingal, as at the time of trial, was contesting a superannuation contribution guarantee debt in the amount of $132,719.17. It is not entirely clear from Mr Buff’s affidavit evidence whether this is part of the statutory demand amount or additional to it. During submissions, counsel for Fingal confirmed that it was additional. I have adopted this as the correct position.
[92] Subject to the capacity to enforce any director’s guarantees.
At this stage, I am prepared to assume that the liquidator, as agent for Fingal, and for so long as it does continue to operate the business, will use his best endeavours to comply with the terms and conditions of the leases including payment of all amounts due to the landlord in a timely manner. This, of course, must be subject to the future financial success or otherwise of the business. If anything, given the presence of an official liquidator and while the company continues to trade, I am more confident now that the rent and outgoings will be paid out of cash flow, in accordance with the terms and conditions of the lease and in a timely manner.
I turn then to consider other factors bearing on an assessment of the capacity of Fingal to continue to pay rent and outgoings into the future.
Fingal has been in occupation of the premises as tenant since 6 October 2006. During that period it has conducted the motel business and during that period it has managed to pay all rents and outgoings due to Riviera, albeit not as and when they fell due.
At present, rent and outgoings are up to date and timely payment has been effected for the last number of months. In addition, Fingal has managed this notwithstanding the existence of other significant demands on its cash flow over recent times.
During the second half of last year, Fingal met Riviera’s statutory demand for arrears in the amount of $141,426.66 (21 September 2012). Within 10 days or so (2 October 2012) it paid the sum of $56,945.11 being the monthly rent and outgoings for June 2012. Approximately two weeks thereafter (18 October 2012) Fingal paid more than $57,000 to Riviera with respect to the July 2012 rent and some three weeks or so after that (8 November 2012) it paid Riviera a sum in excess of $167,000 to bring its account up to date for the period up to and including October 2012. Thereafter, as has already been indicated, Fingal has managed, by and large, to pay the monthly rent and outgoings as and when they fell due.
Indeed, Fingal managed to pay the December 2012 invoice in the amount of $83,660.94 and the February invoice in the amount of $94,863.98 both of which were significantly greater than a typical monthly invoice (because of the high proportion of annual outgoings that had accrued during these months).
In addition, between the end of 2012 and early 2013, Fingal also had to deal with the Australian Taxation Office. On 2 November 2012 the ATO winding up proceedings based on its statutory demand in the amount of $557,713.37, were commenced. Between then and 13 February 2013 Fingal managed to pay $305,000 towards this ATO debt.[93] The balance of the ATO statutory demand (the uncontested debt) is now $252,713.37. In addition, there is a further debt said to be due to the ATO in the amount of $132,719.17[94] to which Fingal has lodged an objection. This challenge has not yet been resolved. Nevertheless, on any analysis, there remains a substantial debt due to the ATO. However, now that Fingal is in liquidation the pressure on Fingal to meet that debt in the short term and at the same time as it must meet all of its necessary expenses in conducting the motel business, including the landlord’s rent and outgoings, may have been ameliorated somewhat. If anything, the capacity for Fingal to meet its obligations to pay its trade creditors and the rent and outgoings under the leases will be enhanced at least in the short to medium term provided the liquidator were to continue to conduct the business.
[93] Fifth Buff affidavit at [21], TB 2/479 and exhibit P23.
[94] TB 2/478.
In this respect, I have not overlooked Mr Buff’s evidence to the effect that Fingal was only able to pay the amounts that it paid to the ATO through a combination of cash flow and “capital injection” from family members or from other parties in the group.
On the evidence before the Court the only debts claimed against Fingal which involved litigation or threat of litigation during the second half of 2012 and the beginning of this year were the ATO debt (discussed above) a WorkCover SA debt in the amount of $13,575.55 which debt was discharged in full on 5 February 2013,[95] a debt due to Madgwicks Lawyers[96] which, as at 23 January 2013 (the date of the fifth Buff affidavit) had been paid in full,[97] and a debt due to a creditor called Programmed Maintenance Services which, as at the date of the fifth Buff affidavit, had agreed to a payment plan of $1,000 per week.[98] It would seem that, to this point, Fingal has managed to meet its monthly trade creditor expenses. Furthermore, nett cash flows have been positive in each of the years ending 30 June 2010, 2011 and 2012.
[95] Exhibit P24. WorkCover SA was a supporting creditor with respect to the ATO petition.
[96] Also a supporting creditor.
[97] Fifth Buff affidavit at [23.1], TB 2/479.
[98] Fifth Buff affidavit at [23.3], TB 2/479.
In addition, it is likely that an abnormal factor affecting Fingal’s financial capacity over the past 10 months or so has been the expense of and management time devoted to the present litigation.
During the trial I received a significant amount of evidence concerning occupancy rates and average daily room rates over the years and, as I have previously indicated, a number of versions of the financial statements, all of which were criticised during the searching cross-examination of Mr Buff. It is plain that the motel business has for some time been in significant financial difficulty. The ATO inspired appointment of a liquidator to Fingal is proof enough of that. It would serve no purpose for me to analyse in any detail all of the financial evidence that was presented. This case is not primarily concerned with Fingal’s solvency at a given point in time. It is unlikely that I would be able to reach reliable conclusions as to its financial position with any more specificity than those I have reached to this point.
What is clear is that Fingal has a lengthy history (from 2006 to date) of running the motel business from the leased premises. Throughout that period it has, albeit not without difficulty and not without repeated delays, met its financial obligations under the lease. On the information available to me, the question is not so much will Fingal be able to pay the rent and outgoings under the lease on the assumption that it continues to trade in the manner and with at least the level of success it has had in the past. The real question is whether or not it will be able to pay on time each month in the absence of any indulgence from the landlord. In Jam Factory Pty Ltd v Sunny Paradise Pty Ltd[99] Ormiston J said.
As to failure to pay rent, this is clearly not an exceptional case. Some idea of what that exception requires may be gained from a comment which appears in two of the authorities. Rigby LJ said in Newbolt v Bingham… that he knew of no case where a court of equity had refused relief because actions had to be brought on previous occasions to recover the rent… . Here it had not been necessary to bring an action for the rent in the past and there had been few complaints for the latest payment apart from the last two months, was three weeks beyond the due date. The power to refuse relief is clearly reserved for cases of consistently late defaults which may fairly lead to an inference that, even if relief be given, there is a reasonable likelihood that the rent will not be paid in the future, at least for some considerable time after the due date for payment. (Emphasis supplied.)
[99] [1989] VR 584 at 591.
Notwithstanding the consistently late payments in the past, I am not persuaded that there is a reasonable likelihood that the rent will not now continue to be paid in the future, in accordance with the lease requirements. Furthermore, this is a case where, in my view, the approach of McLure J in Old Papa’s Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd & Ors[100] is apt. Her Honour after noting that equity regards forfeiture for non-payment of rent essentially as a security mechanism went on to observe as follows.[101]
Seen in that light, a lessee might properly be given the benefit of any uncertainty concerning its financial capacity to comply with its obligations because any subsequent breach of the lease can be met with a further termination for which relief from forfeiture is unlikely to be granted.
[100] [2003] WASCA 11.
[101] At [132] and speaking on behalf of the court which included Murray and Parker JJ.
I recognise that the appointment of a liquidator on the ground of insolvency, typically, should operate as a very strong, in some cases conclusive, factor against granting relief on the basis that, ordinarily, it would be a powerful indicator that a tenant could not be relied upon to pay the rent in the future.[102] However, anticipated insolvency and even actual insolvency is not, of itself, an automatic bar to relief.[103] The authority that most strongly supports Riviera’s position here is Direct Food Supplies (Victoria) Pty Ltd v DLV Pty Ltd.[104] However, it was a very different case on the facts and is distinguishable.[105] In Hayes v Gunbola[106] Young J noted that it can be in the public interest to grant relief in such circumstances because the valuable property in the lease will inure to the benefit of the creditors.
[102] See Ormiston J in Jam Factory at 591: “the only way in which the landlord could deny the applicant relief in this case was by showing that it was or would soon become insolvent because its business was badly run…”.
[103] See generally, Hayes v Gunbola (1986) 4 BPR 9247 (NSWSC) Young J at 9250-9251; (1988) NSW ConvR 55-375, Direct Food Supplies (Vic) Pty Ltd v DLV Pty Ltd [1975] VR 358, Greenwood Village Pty Ltd v Tom the Cheap (WA) Pty Ltd [1976] WAR 49, Howard v Fanshawe [1895] 2 Ch 581, Stieper v Deviot Pty Ltd NSWSC unreported 21 April 1977 (Needham J), Re Brompton Securities Ltd (No 2) [1988] 3 All ER 677 at 680-681 (where Vinelott J observed that where a liquidator of the tenant had been appointed, the landlord was in no different position from any other landlord with an impecunious tenant), and also Lord Simon in Shiloh Spinners v Harding [1973] AC 691 at 726.
[104] [1975] VR 358.
[105] See Starke J at 361 where his Honour found that the lessee’s financial position was hopeless and it was clear that it would be unable to pay its rent in the future.
[106] At 9250-9251.

To this point and if I were to focus only on Fingal’s history of delayed payment of rent and outgoings I would be satisfied that the matter fell within the description given by Ormiston J in Jam Factory as applied to the tenant in that case.[107]
In the present case, the worst that can be said of the tenant was that its approach to its obligations to pay rent and outgoings was desultory. In many respects it does not deserve to be relieved against the forfeiture but its acts did not display a deliberate denial of the landlord’s rights, nor were the earlier breaches of that obligation of a kind which could place this case in the “exceptional” category.
[107] At 591. See also Hace Corp Pty Ltd v F Hannan (Properties) Pty Ltd (1995) 7 BPR 14,326 at 14,329 (McLelland J).
Furthermore, there are other matters that strongly support a favourable exercise of the discretion to grant relief.
Prejudice to Riviera and to any third parties
Should relief be granted, Riviera will suffer little, if any, prejudice. To this point, but subject to the question of where the costs of the litigation between the parties should fall, there has been no demonstrated loss to Riviera. All Riviera’s monetary entitlements (including interest for late payment of rent and outgoings, administration fees and legal costs incurred by Riviera in taking extra curial steps to enforce its entitlements, all as provided for under the leases) have been paid.
After I have ruled on the relief against forfeiture application I will need to hear the parties further on the question of the costs of the litigation itself. However, even if Fingal were to be ordered to pay all or part of Riviera’s costs of the litigation, the issues of whether or not, in the circumstances of this litigation, payment of costs ought be made a condition of any relief granted and, if so, on what terms[108] also will need to be determined.
[108] Such as, for example, whether or not time to pay should be allowed.
In these circumstances, it is difficult to see how Riviera will suffer any prejudice in the future should the leases be reinstated provided, of course, that Fingal were to continue to observe its obligations under the leases. Of course, if Fingal were not to continue to observe its obligations under the leases, Riviera would have the right to re-enter again. Riviera has already demonstrated that it has the capacity to promptly and effectively exercise its legal rights in this respect. Furthermore, it is safe to say that any second application for relief against forfeiture for non-payment of rent[109] would have a much reduced prospect of success than has the present one, particularly if outstanding rent were not to be brought up to date very promptly. In these circumstances, it is unlikely that Riviera will be put at risk of a substantial loss of rent in the future in the event that relief were to be granted.
[109] Riviera has already indicated that if relief in the present application were to be granted it would immediately seek to re-enter and forfeit the leases again but this time based on its asserted right to do so pursuant to another provision of the lease which has nothing to do (directly) with non-payment of rent. I will return to this issue later in these reasons.
In the third Economos affidavit (sworn 10 October 2012) Mr Economos deposed to the following.[110]
[11]Riviera has suffered prejudice and continues to suffer prejudice as a result of Fingal’s failure to pay the amounts due under the former leases as at the date of the re-entry on 4 June 2012 and amounts for its continued occupation and use of the premises subject to the former leases after that date, as referred to in paragraph 6.2 of my second affidavit.
The last mentioned prejudice includes the following:
11.1   Riviera has been unable to pay for its expenses associated with the operation of the former leased premises (ie rates, taxes, utility charges, fire maintenance services, legal expenses etc) from its own funds and has had to borrow moneys on interest bearing terms from other companies associated with it to continue its operations;
11.2   a large amount of administrative time has been occupied by me and Julie Frith, a part-time bookkeeper, in undertaking financial reconciliations, extracting archived records, communicating with creditors, and instructing solicitors, which would otherwise have been spent on profit-making business activities;
11.3   if the costs that Riviera recovers as a consequence of Fingal’s breach of the former leases are on a “party/party” basis then there will be a significant portion which it would be forced to bear, unrecompensed;
11.4   Riviera has an adverse credit reference … which will not be removed until 24 February 2017.
[110] Paragraph [11], TB5/1520.
As far as subparagraph 11.1 is concerned, there is no evidence of the extent of any such prejudice incurred. However, the financial accommodation referred to has been provided by associated companies and it can be inferred that the “interest bearing terms” are likely to have involved a market or commercial rate of interest, if not a more favourable (to Riviera) rate. There is no evidence before the Court that Riviera was not in a position to approach an arm’s length borrower to obtain market or commercial rates. To the extent that the associated companies might have charged interest over and above a market or commercial rate, this would be for the purposes of the group of which Riviera is a member and not caused by Fingal’s conduct. In any event, Riviera has charged and been paid interest calculated in accordance with the terms of the leases with respect to all overdue payments. The interest rate under the leases is 2% above the Westpac overdraft rate and, for example, in April 2012 the interest charged to Fingal was 12.15%.[111] I accept Fingal’s submission that this should be regarded as a favourable rate as far as Riviera is concerned, particularly given that, to the extent that it has needed to borrow money, it has borrowed it from associated companies.[112] Given the paucity of evidence in support of the assertion in subparagraph 11.1, I place little weight on it.
[111] See, for example, invoice No 67 at TB5/1490 and TB5/1499.
[112] In any event, the total of interest payments charged to Fingal during the period of the relationship and paid is a relatively very small sum. Any difference between that and any interest charged to Riviera, if any, must have been close to, if not, de minimis and inconsequential.
As far as subparagraph 11.2 is concerned, again no particulars as to the amount of administrative time nor the true cost of that time to Riviera has been provided. Subparagraph 11.2, like subparagraph 11.1 (above) smacks of exaggeration and I place little weight on it. Subparagraph 11.3 raises a matter that will need to await my determination of the costs of the litigation. The matter raised in subparagraph 11.4 is unfortunate but there is no evidence before the Court which demonstrates that any adverse financial consequences have resulted or, if so, the extent thereof.
I accept that Riviera has suffered inconvenience and frustration and that there may be some relatively minor costs and expenses incurred or suffered to this point that will not have been fully recouped. Nevertheless, any such “prejudice” suffered to this point is extremely minor and particularly so, when compared with the prejudice that will be suffered by Fingal should relief not be granted, to which prejudice I will turn shortly. As I have indicated, there is no reason to think that Riviera will necessarily suffer significant prejudice in the future, in the event that relief were to be granted.
In this latter respect, it is to be noted that no third party rights have intervened. At no point has Riviera entered into possession of the premises or entered into arrangements on its own behalf with suppliers or any other potential creditors. There has been no commitment given by Riviera to any other prospective tenant of the premises.
There has been no claim by Riviera or evidence given to the effect that it would seek to lease the premises to a new tenant or as to the rent that would be obtained should the premises be leased to a new tenant. The limited evidence given by Mr Economos during cross-examination was to the effect that, if relief against forfeiture were to be refused, Riviera’s present intention was to move back into the motel and carry on the motel business itself and for its own benefit.
Prejudice likely to be suffered by Fingal should relief be refused
If relief were to be refused there is a very real risk that substantial prejudice would be caused to Fingal.[113] In 2006 Fingal purchased the motel business as a going concern from Riviera at a cost of $1.8 million. Plainly an essential feature of the transaction and one which would have informed considerably this substantial price paid was the existence of a secure right of occupation of the premises. At the time it purchased the business, Fingal acquired from Riviera two three-year leases, together with multiple rights of renewal which, if all were exercised, would allow it to occupy the land until 2039. In a sense and without in any way meaning to re-characterise the legal nature of the sale transaction between the parties in 2006 (about which the Court has very little evidence) Fingal paid a substantial premium for the grant of the leases with their multiple rights of renewal.
[113] See, eg, Sparta Nominees Pty Ltd v Orchard Holdings Pty Ltd & Ors [2002] WASC 54 at [256]; see also, as to a comparison of relative prejudice, Lontav Pty Ltd v Pineross Custodial Services Pty Ltd [2011] VSC 278 at [109].
The Court received some evidence of the value of the motel business for the purposes of a prospective sale none of which, for various reasons, was particularly satisfactory. However, in 2011 Mr James Chapman, a business broker, was engaged by Fingal to broker a sale of the business.[114] At the date of swearing his affidavit (13 December 2012) Mr Chapman was of the opinion that a realistic asking price for the business was in the range of $2.5M to $2.6M. I accept the submission of Riviera that this is not to be regarded as a reliable valuation of the business. I rely on Mr Chapman’s evidence (and the fact that Fingal paid $1.8M in 2006) only as indicating a, very much ball park, sale price should the business with secure tenure until 2039 be sold. It is not necessary that I form a view as to the actual value of the motel business as a going concern. What is clear is that, if security of tenure was in place, the business would have a substantial value and any successful sale would come with a substantial price. The motel operates in a good location (the western end of North Terrace in the city of Adelaide across the road from the new Royal Adelaide Hospital presently under construction). It operates from a multi-storey purpose equipped building with its own car parking facilities and it generates a very substantial turnover in the order of $2.8 million per annum.
[114] Chapman affidavit, TB 3/790.
What is of particular significance to the present matter is that, without security of tenure, the value of the motel business for sale as a going concern would appear to have been nigh on destroyed. According to Mr Chapman, during the last quarter or so of 2012 he actively marketed the business at Mr Buff’s request.[115] Mr Chapman received a number of enquiries and met with parties who had expressed interest. According to Mr Chapman there have been 8 inspections of the property during this period but no one who expressed interest has made an offer. Not surprisingly, he deposed to the following.[116]
From my discussions with potential purchasers, the legal action by the landlord appears to be widely known and the parties who have expressed interest have told me they will not make an offer until the legal proceedings are resolved.
[115] Chapman affidavit TB 3/790. Paragraphs [10]ff.
[116] Paragraph [15].
If the leases were to be and remain reinstated, Fingal would again have a valuable asset available for sale. However, any prospects of sale have been severely compromised, probably eliminated, whilst Fingal remains without security of tenure.
In the ordinary course, it can be expected that Riviera, should it resume possession of the premises, would conduct the business to its own advantage (as Mr Economos indicated in his evidence) and would be in a position to consider whether it might sell the motel business again, and again for a hefty premium, given that it would be able to offer any new proprietor a long term lease – just as it did to Fingal. Of course, Fingal would retain its plant and equipment but it would lose whatever goodwill it has built up since its acquisition of the business in 2006 and would lose much of that for which it paid $1.8 million in 2006. Any such goodwill would revert to Riviera.
In addition, Fingal would be unable to meet its obligations pursuant to the Choice Hotels franchise agreement to which it is a party.[117] If so, it may well become liable to pay substantial liquidated damages in accordance with the terms of that agreement.
[117] TB2/361.
In addition, Fingal would no longer be able to service its loan (in excess of $1.5 million) from the ANZ Bank. It is clear from the balance sheets of Fingal in evidence that the fixed assets available to Fingal, such as its plant and equipment, over which the ANZ Bank has a charge, will be insufficient to meet the debt to the ANZ Bank.[118] In these circumstances, it is likely that the ANZ Bank would be entitled to call on personal guarantees provided to it by the directors of Fingal, Mr Buff and Mr Hammond.[119]
[118] As at 30 June 2012 fixed assets were recorded in Fingal’s balance sheet in the amount of $414,679.43, TB 1/133.
[119] See the second Buff affidavit at paragraph [38] TB2/347.
I agree with the submission put on behalf of Fingal that there is a substantial disparity between the value to Fingal of the property (the leasehold interests) that has been forfeited, as compared with the relatively minimal damage or prejudice that will inure to Riviera should relief against forfeiture be granted. I agree that the nature and gravity of the breach relied upon by Riviera (failure to pay one month’s rent on time) is wholly disproportionate to the prejudice which Fingal will suffer should relief not be granted. In addition, even when account is taken of the nature and gravity of all of Fingal’s defaults (including the consistently irregular and delayed payments of rent and other outgoings) and the prejudice that this caused Riviera in the past, I still would consider this to be wholly disproportionate to the prejudice which Fingal will suffer should relief not be granted.
Benefit or windfall accruing to Riviera
Fingal submits that the Court can take into consideration the fact and nature of the benefit or the windfall that Riviera would enjoy should it be permitted to resume possession of the land. I agree with this submission.[120] Whether or not it is right to characterise the benefit that would accrue to Riviera as a “windfall”, I am satisfied, as has already been discussed, that it will obtain a substantial benefit should relief be refused, being a benefit over and above that of ridding itself of an unsatisfactory tenant and of being in a position to replace that tenant with a more satisfactory one. Riviera will be restored to possession after only seven years, some 25 or more years early when the circumstances in which it received the $1.8 million from Fingal are borne in mind. In addition, it will obtain:
(i)the benefit of bookings and reservations currently secured by Fingal;
(ii)the benefit of any business goodwill;
(iii)the benefit that will become available from the motel being located opposite and in very close proximity to the new Royal Adelaide Hospital currently under development;
(iv)the benefit of possession of the motel and the carpark with the flexibility for future use and/or development that that will entail, much sooner than Riviera ordinarily could have expected.
[120] See, for example, Winsix Hotels (Oxford St) Pty Ltd v Toomey [2004] NSWSC 236 at [63]-[70] “this matter of windfall… makes it more likely that relief… should be given rather than less likely”, Liristis Holdings Pty Ltd v Wallville Pty Ltd (2001) 10 BPR 18,801; [2001] NSWSC 428 at [120].
I will now deal with some of the other factual matters of significance put on behalf of Riviera in opposition to Fingal’s claim.
Further matters put on behalf of Riviera
In its written submissions[121] Riviera has identified various costs and expenses to which it has been put as a consequence of Fingal’s conduct. Riviera submits that the expenses to which it has been put include its costs:
(i)of the proceedings commenced by Riviera for possession;
(ii)of its application for summary judgment;
(iii)of Fingal’s now abandoned defence to the possession application;
(iv)of Fingal’s counterclaim (for relief against forfeiture);
(v)of Fingal’s application for summary judgment on its counter claim; and
(vi)otherwise incurred, the recoupment of which it is entitled by virtue of clauses 19.1 and 17.2 of the leases.
[121] Paragraph [76].
The matters referred to in (i)-(v) will be resolved as a consequence of any costs orders I might make after hearing further from the parties. Riviera also directs a number of criticisms at the nature of the undertaking to pay rent and costs given by Mr Buff on behalf of Fingal and submits that the undertaking is worthless. I refer to my earlier discussion of this issue. As to (vi) above, Riviera has not identified any other costs and expenses incurred by Riviera which have not yet been recouped. Fingal has conceded that it should be liable to pay Riviera’s costs with respect to its possession proceedings (I will need to hear from the parties as to whether or not such an order for costs will be on a basis other than party/party) but Fingal has not conceded an entitlement in Riviera to be paid its costs of resisting Fingal’s proceedings for relief against forfeiture.
Riviera in its written submissions argued that “there is incontrovertible evidence that Fingal cannot and will not comply with its obligations under the former leases” as a result of the ATO winding up application.[122] I have already discussed this. I agree that the appointment of a liquidator and Fingal’s financial circumstances, more generally, must carry significant weight. In this respect, Riviera also relies on clause 14.3.3.3 of each of the leases. Clause 14.3.3 provides:[123]
[122] Written submissions at [83]ff. It is to be remembered that the written submissions were provided at a time when Fingal was still attempting to resist the ATO’s winding up application.
[123] TB 3/888, 931.
14.3 Default, Breach and Re-Entry
In the event that:
…
14.3.3in the case of a Lessee being a company:
14.3.3.1a meeting of the directors or members of the Lessee is convened to pass a resolution that an administrator of the Lessee be appointed or that the Lessee be wound up voluntarily;
14.3.3.2any person appoints an administrator of the Lessee;
14.3.3.3an application is made to any court to wind up the Lessee:
14.3.3.4an application is made pursuant to Section 411 of the Corporations Law;
14.3.3.5a Controller, Managing Controller, Receiver or Receiver and Manager is appointed to the Lessee or in respect of any property of the Lessee; or
14.3.3.6the Lessee is deregistered or dissolved;
…
Then despite any other clause of this Lease the Lessor at any time has the right to re-enter into and upon the Premises in the name of the whole and to have again re-possess and enjoy the same as of its former estate…
Riviera, through its counsel, informed the Court that, in the event relief were to be granted, Riviera would immediately exercise the contractual right under clause 14.3.3.3 to again re-enter the premises and forfeit the leases. Accordingly, to grant relief against forfeiture in accordance with Fingal’s present application would be futile.

Of course, the factual position has changed since that submission was made. The Court now knows that an order for winding up of Fingal has been made.[124] However, whilst the right to re-enter conferred by clause 14.3 appears to be triggered by, inter alia, the appointment of an administrator of the lessee (cl 14.3.3.2) or of a controller, managing controller, receiver or receiver and manager to the lessee or in respect of any property of the lessee (cl 14.3.3.5), it does not appear to be triggered by the making of an order for the winding up of the lessee and the appointment of a liquidator. However, Riviera submits that once an application has been made to wind up (cl 14.3.3.3), that will be sufficient in accordance with the terms of clause 14.3 and becomes a matter of historical fact that cannot be undone.
[124] Exhibit D42.
Accordingly, as from 2 November 2012 (the date the Deputy Commissioner of Taxation commenced winding up proceedings against Fingal) Fingal was in default or in breach of clause 14.3 and in a way that could never be rectified such that, thereafter, Riviera had an irresistible entitlement to re-enter and forfeit the leases.
In the context of its submissions concerning clause 14.3.3.3, Riviera again presented a strong attack on the credibility of Mr Buff.[125] I deal with Mr Buff’s credibility and reliability elsewhere in these reasons. However, as already indicated, the landscape has changed at least insofar as the future performance of the company is concerned, now that Fingal is under the control of a liquidator rather than under the control of Mr Buff and Mr Hammond.
[125] See, for example, written submissions at [87]-[90] (pages 35-40).
Rivera’s argument based on clause 14.3.3.3 must be accorded significant weight. I am satisfied, as I have indicated, that Riviera intends to leave no stone unturned in its attempts to rid itself of this tenant and that, if necessary, it will rely on clause 14.3.3.3 for this purpose to the full extent to which it may be entitled.
Nevertheless, the proper construction and application of 14.3.3.3 is likely to raise a number of issues that are not without difficulty. Without being comprehensive the following matters may need to be resolved before Riviera might succeed with any further act of re-entry and forfeiture based on clause 14.3.3.3.
(i)If Fingal were to succeed with its present application and the leases were re-instated (whether nunc pro tunc or otherwise) would it necessarily follow that there will have been a breach of or the occurrence of an event sufficient to trigger clause 14.3.3.3, given that when the ATO’s application was made (2 November 2012) the leases had already been forfeited and were no longer in existence or contractually binding on either Riviera or Fingal?[126]
(ii)Presumably (although there may be room for argument) Riviera will need to comply with s10 of the Landlord and Tenant Act before it can effect any available re-entry and forfeiture in reliance on clause 14.3.3.3. If so, any right to re-enter and forfeit to which Riviera might be entitled will not arise immediately upon the re-instatement of the leases, should this occur.
(iii)In any event, Fingal would be entitled, again, to seek relief against forfeiture in reliance on either the equitable or statutory jurisdiction. Such an application would need to be considered on its merits at the time and, probably (although this also may be the subject of argument) without the stigma that ordinarily would attach to a second application for relief against forfeiture on the basis of non-payment of rent.
(iv)Again, without in anyway prejudging the matter, if the Court were to be satisfied, at the time, that rent and outgoings were being met in accordance with and Fingal was otherwise in compliance with the requirements of the leases and that no prejudice was likely to be suffered by Riviera, the granting of relief against forfeiture and notwithstanding the triggering of clause 14.3.3.3 (if established) would not necessarily be out of the question. In these circumstances, the fact that Riviera would no longer be exposed to the risk of having its receipt of ongoing rent and outgoings characterised as unfair preferences (see further below), would be relevant to the question of any prejudice likely to be suffered by Riviera.
[126] This issue may be a consideration, on which I would need to hear further from the parties, relevant to the form of orders to be made should relief be granted.
As I have said, the potential for clause 14.3.3.3 of the leases to render any grant of relief against forfeiture, based on the present application, to be short lived does carry considerable weight. Nevertheless, a Court can and should only deal with issues that are properly before the Court at the time of the decision to be made. A tenant, having obtained relief against forfeiture, is always at risk that another right of re-entry will become available to the landlord in the future and will be exercised. To place undue weight on the clause 14.3.3.3 issue would be, in effect, to pre-empt a determination of the issues raised above (and possibly others) in circumstances where they are not yet properly before the Court. In particular, to place undue weight on the clause 14.3.3.3 issue would, in effect, be tantamount to determining in advance any further application for relief against forfeiture that Fingal might bring, without the full circumstances, relevant as at the time of any such future re-entry and forfeiture, being before the Court. A similar concern was dealt with by Jackson CJ in Greenwood Village Pty Ltd v Tom the Cheap (WA) Pty Ltd[127] in a manner with which I, respectfully, agree. His Honour said this.[128]
The plaintiff also relies on the scheme of arrangement entered into by the defendant with its creditors as a ground upon which relief should be refused. Clause 26 of the lease provides for a right of re-entry by the lessor, not only for non-payment of rent and for breach of covenant but also if the lessee “shall enter into a liquidation or enter into any arrangement or composition for the benefit of the creditors”. Counsel for the plaintiff argues that it would be pointless to grant relief in these proceedings because the plaintiff could at once re-enter under clause 26. But this raises some questions, which have not been fully argued before me, in relation to a landlord’s right of re-entry following the tenant entering into an approved scheme under s181 assuming the scheme does not bind the landlord, and as to whether further relief against forfeiture following such re-entry might not be available to the tenant. I consider that I should apply the dominant principle that upon payment of the rent and any expenses incurred, a tenant should be relieved from forfeiture. If in fact a further right of re-entry has arisen and is exercised, and a fresh application for relief is made, that will be a matter to be considered and decided according to the circumstances which then obtain.
[127] [1976] WAR 49.
[128] At [53].
In the context of the clause 14.3.3.3 issue, both parties made quite detailed submissions concerning the risk to which Riviera might be exposed in the event that future receipts of rent and outgoings might be characterised and subject to avoidance as unfair preferences, together with the current status, in Australian law, of the so called “landlord’s defence”.[129] Given the appointment of a liquidator now, I do not need to come to a final view as to whether or not future payments of rents and outgoings are at risk of being characterised as unfair preferences.
[129] See, eg, Re Discovery Books Pty Ltd (1973) 20 FLR 470, McKern & Ors v Minister Administering the Mining Act 1978 (WA) (2010) 28 VR 1 and VR Dye and Co v Peninsula Hotels Pty Ltd (in liq) & Anor [1999] VSCA 60.
Riviera complains also that, and depending upon the validity of the so called “landlord’s defence”, it remains at risk in respect of payments made over the last 11 months or so given that the leases were terminated on 4 June 2012, as a matter of law. This may be so but a withholding of relief against forfeiture as to the future will not improve Riviera’s position in this respect, nor will the granting of relief worsen it.
Riviera also drew the Court’s attention to the requirements of clause 12.6.1 in each lease[130] which would have the potential to constrain Fingal’s entitlement to exercise each of the rights of renewal provided for by clause 12 of the leases. Clause 12.6 provides as follows.
12.6 No renewal entitlement
The lessee will not be entitled to a right of renewal pursuant to clauses 12.1, 12.2, 12.3, 12.4 or 12.5 (as the case may be) if:
12.6.1there is an unremedied breach of this lease at the time of giving the notice to exercise the right or [sic: of] renewal…; or
12.6.2…
Riviera has argued, in effect, that it is artificial to consider the prejudice or loss that Fingal would suffer, in the absence of relief, through the prism of the five rights of renewal contained in the leases which, if exercised, would take Fingal’s period of occupation out to 2039.
[130] TB 3/887 and 929.
Riviera submits that because of Fingal’s “breach” of clause 14.3.3.3 as a result of the ATO’s application to wind up on 2 November 2012 and the inability of Fingal to remedy that “breach”, Fingal will have been permanently and irremediably disqualified from exercising the first right of renewal provided for in the leases. Even if Riviera were prevented from exercising or relying on the right of re-entry under clause 14.3.3.3 which it claims will remain available to it, Fingal still would have no access to the benefit of any reinstated leases past 5 October 2014.
Again, this is a consideration which should be accorded considerable weight. If correct, the financial benefit that Fingal might expect to derive following a reinstatement of the leases would be significantly compromised and, perhaps most importantly, the prospect of attracting a purchaser for the motel business would remain very low given that Fingal would not be able to offer a long tenure to any perspective purchaser. In practical terms, it can fairly be assumed that any interested purchaser would only be prepared to pay a low price for a motel business that only had a lease over the premises for 18 months or so and, even then, only if it were able to negotiate directly with the landlord for a new and longer lease.
Riviera’s argument here raises, at least, the following issues.
(i)Whether or not the ATO’s application to wind up the lessee might properly be characterised as conferring a contractual right on Riviera to re-enter rather than as a breach of the lease falling within and for the purposes of clause 12.6.1.[131]
(ii)If it were to be characterised as a breach falling within clause 12.6.1, would it be characterised at the time of a purported exercise of the first renewal (sometime in 2014), as a still extant and unremedied breach?
(iii)Is the precondition to the exercise of a right of renewal, as provided for in clause 12.6.1, always to be construed in absolute terms, particularly in the case of a breach of or failure to observe a negative covenant (such as 14.3.3.3)? In other words, could the position arise where such a breach or failure to observe should be regarded as spent for the purpose of clause 12.6.1? For example, what would the position be if, at the time Fingal purported to exercise the first right of renewal sometime towards the middle of 2014,[132] the liquidator had successfully traded the motel business to profitability and Fingal was no longer in liquidation? For example, what would the position be if, by that time, Fingal had negotiated the sale of the motel business to an arms length solvent purchaser which purchaser met with the approval of Riviera?[133]
[131] The heading to cl 14.3 is “Default, Breach and Re-Entry”. Arguably, the notions of “Default” and “Breach” relate to different things and that all of the alternatives in cl 14.3 are not necessarily intended to be characterised as breaches. In any event, cl 1.3 of the leases provides that “headings” are for convenience only and do not affect interpretation. This allows for cl 14.3 to be construed according to its terms without any predisposition to any particular alternative being construed as either a “breach” or a “default”. In Wynsix Hotels (Oxford St) Pty Ltd v Toomey [2004] NSWSC 236 Young J construed a similar (but not identical) lease clause as only listing events rather than covenants such that the lease there was brought to an end not because of breach but by agreement in the sense discussed in Shevill v Builders Licensing Board (1982) 149 CLR 620.
[132] In order to exercise a right of renewal the lessee is required under clause 12 to serve a written notice on the lessor not less than three months and not more than six months prior to the expiry of the then existing term of the lease. In this case, it would seem that the latest that Fingal could issue a notice for the first renewal would be no less than three months prior to 6 October 2009.
[133] Clause 9 of the leases, TB 3/880 and 924 sets out provisions relating to assignment and subletting which are in relatively common form. In effect, Fingal would be entitled to assign the leases provided it obtained the prior consent of Riviera which consent must not be unreasonably withheld.
None of these issues was explored during submissions in any detail. In any event, for reasons similar to those earlier set out with respect to clause 14.3.3.3, it is not possible (other than perhaps with respect to (i) above) and it would be premature to form a concluded view about these matters.
I have canvassed Riviera’s argument[134] that the value of the motel business must now be seen as very low and the loss of it not disproportionate to the gravity of the breach because of the inevitable (as Riviera would have it) loss of the five rights of renewal as a result of the interaction of clauses 14.3.3.3 and 12.6.1. I add here as a practical consideration, that it is possible, perhaps likely, that the lessor’s attitude to this tenant and its unrelenting insistence on enforcing its strict legal rights will itself have an effect on the capacity to sell the business. Any proposed new tenant will have to accept that it must deal, potentially for decades, with such a landlord. In my view, this litigation and the landlord’s approach is likely to have caused damage to the leasehold interests should they be restored to Fingal. However, this is hardly something that can be counted in favour of Riviera.
[134] Put again at [117] of Riviera’s written submissions.
Riviera posed a strong challenge to Fingal’s evidence and its submissions concerning the value of the asset Fingal says it will lose, mainly the value of the motel business dependent as that value is on security of tenure.[135] For the reasons I have given earlier, it is unnecessary that I make findings concerning the value of the business that are more specific than those I already have been prepared to make.
[135] See, for example, Riviera’s written submissions at [114]-[136].
Riviera also complained strongly about Fingal’s past practices of entering into direct negotiations with various creditors concerning the payment of outgoings. Under the leases Fingal was obliged to “pay or reimburse the lessor” for certain outgoings including land tax, council and water rates. Initially, Riviera sent copies of relevant accounts to Fingal with a request that Fingal arrange direct payment. However, in time, Fingal arranged for the accounts to be sent directly to it, by-passing Riviera. However, Fingal failed to pay these various accounts on time and Riviera received overdue notices, debt collection notices, solicitor letters and court summonses. In fact, Fingal had entered into payment plans and had defaulted on them. Riviera was never consulted about this. According to Mr Economos, had it been consulted it would not have approved. I accept this evidence. There is no doubt that Fingal’s conduct in this respect was illustrative of the ongoing cash flow difficulties it was facing. I also accept that it caused significant difficulty and embarrassment for Riviera in relation to these creditors and for Mr Economos in particular.[136] The conduct of Fingal and the problems it caused are now in the past. For quite some time now, Riviera has taken primary responsibility for payment of these outgoings and Fingal has been reimbursing Riviera for outgoings on a monthly invoiced basis.
[136] Including the entry of a default judgment and an adverse credit reference against Riviera and service of an investigation summons on Mr Economos.
Riviera also trenchantly criticised Fingal’s conduct concerning repeated delays in paying Combined Fire Protection Services accounts in early 2012. This resulted in a (short) suspension of fire protection services for the motel. I agree with the submission of Riviera that the potential consequences for the safety of the motel and persons within it could have been severe. However, this breach was remedied on 30 March 2012,[137] well before Riviera re-entered. There was at time of trial a current certificate of compliance issued by CFPS.[138] Ultimately, the issue was one of the late payment not a failure to satisfy fire safety requirements. Whilst this episode is plainly of concern, in my view, the level of concern expressed on behalf of Riviera during the trial was exaggerated.
[137] TB 4/1426.
[138] Covering the period April 2012 to April 2013; JPB33 to the fourth Buff affidavit, TB 2/466.
Riviera submits that any true comparison between the value of the motel business that would be lost to Fingal and the nature or gravity of the breach “requires a comparison with everything that Riviera has suffered on account of the breach and the tortuous course that Riviera has had to engage in on account of [Fingal’s] defaults.”[139]
[139] Written submissions at [138].
In essence, Riviera complains that Fingal’s conduct as an unreliable and poorly performing tenant has caused damage to the “reputation of the premises”, has caused the goodwill associated with the motel business to be diminished which “will likely lead to a reduction of the rent capable of being obtained from any replacement tenant” and, as a consequence “the capital value of the premises may be expected to decline”.
Riviera has given no details or assistance to the Court to enable it to assess the reality of this and, if real, the costs of any such damage to Riviera. As such, it is difficult to know how much weight to give to this, as part of the discretionary judgment to be reached. Part of Riviera’s complaint here is its concern about the conduct of Fingal leading to a decline in value and a causing of damage to the motel business. However, it is not Riviera’s business. Fingal may have been, in part, the author of its own loss in this regard. Essentially, this is a matter for Fingal. Riviera holds a reversionary interest in the land and is entitled to receive rents from Fingal (provided relief against forfeiture were to be granted). There is little, if any, evidence to suggest that Fingal has caused damage to Riviera’s reversionary interest. Riviera is, ultimately, entitled to be restored to possession of the land. However, it has no legal entitlement to retake ownership of the motel business which it sold to Fingal for $1.8M, although this might be the practical outcome following a resumption of possession of the land. Nevertheless, I accept, given the present usage of the land (motel business) that to the extent this usage has been rendered unattractive to potential lessees the rental and capital value of the land might also be affected at least in the short term. However, it is not possible on the evidence to determine whether this has in fact occurred, nor, if it has, the extent to which it may have occurred, nor, if it has, which of the parties should be seen as primarily at fault. Further, if Fingal was granted relief, it would have an opportunity through trading to restore any loss of reputation.

Riviera has raised a litany of complaints about the conduct of Fingal and, in particular, Mr Buff.[140] The conduct complained of includes:
(i)Fingal’s resistance to and delay in complying with Riviera’s lawful demands, including with respect to the statutory demand, late and “conditional” payment of rent, outgoings and other monies due under the leases and Fingal’s wrongful conduct during the time it assumed responsibility for the direct payment of various utilities accounts.
(ii)Mr Buff’s repeated unsatisfactory and misleading interactions with Riviera in relation to the matters identified in (i) above. Riviera has sought to characterise Mr Buff’s conduct towards it over a significant period of time as dishonest and dissembling.
[140] Written submissions at [143]ff.
Much of the conduct of Mr Buff and Mr Hammond, in their dealings on behalf of Fingal, has been characterised by Riviera as disingenuous, redolent of moral turpitude, wilfully avoidant and bordering on, if not mounting to, rank dishonesty.
I had the opportunity of observing Mr Buff under cross-examination for more than three days. During cross-examination, Mr Buff’s evidence on occasions did lack frankness, was evasive and disingenuous and, as a result, was at times unhelpful. However, character and interpersonal relationships are rarely as simply characterised as Riviera would do so here. In my view, the submissions put on behalf of Riviera in this respect fail to acknowledge another likely explanation for much of Mr Buff’s and Fingal’s impugned conduct; that explanation can be found in a combination of incompetence, carelessness and a failure to appreciate early enough the precise and unforgiving nature of the demands being made.
There came a time during the first half of last year (perhaps earlier) when Riviera decided that it would allow no indulgence whatsoever to Fingal and that it would bring all the resources it had to bear on ensuring Fingal toed the line or left the premises. Fingal, because of its cash flow difficulties and a far less than rigorous manner by which it habitually conducted its affairs was unable to match such an opponent.
The conduct of Fingal and, in particular, of Mr Buff is to be viewed in this context. I do not entirely accept the manner by which Riviera would characterise the behaviour and indeed the moral or ethical stand point of Fingal and Mr Buff. At the end of the day there is also some truth to Mr Buff’s explanation given in evidence that the failures by Fingal to observe the lease terms and to meet Riviera’s demands arose from cash flow problems but were not deliberate and Fingal did not intentionally cause embarrassment. Descriptors by the legal representatives for Riviera such as “calculated and motivated by financial benefit untroubled by truth”, “completely unprincipled”, “breathtakingly inadequate and cynical response”, “wilful and contumelious conduct”, to identify just a few, are in my view exaggerated, unfair and tendentious. There is no doubt Fingal behaved badly in the very difficult circumstances that confronted it but neither it nor Mr Buff’s conduct as a whole merits these descriptors.
In any event, Riviera is not entitled to a tenant that satisfies Riviera’s own moral or ethical standards. It is entitled to a tenant that will comply with all of the terms of the leases including, in particular, one that will continue to pay the rent and outgoings in a timely way.
There is no doubt that Riviera, in its submissions, has identified a very large number of criticisms of Fingal’s conduct in its capacity as a tenant (and also as a litigant). And I accept that there is much about Fingal’s past behaviour that warrants criticism. Nevertheless, in my view, Riviera’s submissions in this respect risk should not be allowed to distract the Court from its central task in deciding this application for relief. Riviera seeks to have Fingal’s conduct characterised as showing an absence of clean hands and as being unconscionable. These labels are unhelpful. The better question is whether Fingal’s conduct, in all the circumstances, has been such as to make it inequitable that relief should be granted. I do not find it to have been so.
There was also the suggestion, perhaps only faintly put, that the Court should not force the parties to continue a long term commercial relationship where one has behaved as badly and dishonestly as Fingal has (or at least, where Riviera believes this to be the case). I agree with the response to a similar argument given by McLelland J in Hace Corp Pty Ltd v F Hannan (Properties) Pty Ltd.[141] As in that case, the major protagonists (Mr Economos and Mr Buff) are physically quite separate (Mr Buff operates out of Melbourne). There should be little need for ongoing personal contact of any significance. I consider this matter to be of little, if any, weight.
[141] (1995) 7 BPR 97, 552 at 14, 329.
Where a landlord relies on a single non-payment of rent for its entitlement to forfeit, the extent to which and the purpose for which a court might have regard to other breaches of covenant by the lessee in considering whether to grant relief against forfeiture is not entirely settled.[142] Nevertheless, for present purposes I am prepared to accept that a court is entitled to and should have regard to all of Fingal’s conduct towards Riviera when ultimately deciding whether or not it would be just and equitable to grant relief.[143] In my consideration of this question, in the present case, I have had regard to all of the criticisms of the conduct of Fingal, particularly, in its capacity as tenant levelled by Riviera.
[142] See, for example, Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW Ltd (1970) 2 BPR 9562, Tutita Pty Ltd v Ryleaco Pty Ltd (1989) 4 BPR 9635, Hayes v Gunbola (1986) 4 BPR 9247; (1988) NSW ConvR 55-375, Stieper v Deviot Pty Ltd (1977) 2 BPR 9602, Lo Giudice v Biviano (No 2) [1962] VR 420, Cicinave Pty Ltd v Jasco Pty Ltd (1989) 5 BPR 11,139, Jam Factory Pty Ltd v Sunny Paradise Pty Ltd & Ors [1989] VR 584, Mineaplenty Pty Ltd v Trek31 Pty Ltd [2006] NSWSC 1203 at [68].
[143] This is the more general (and most generous from a landlord’s perspective) test posed by Hodson J in Gill v Lewis [1956] 2 QB 1 and adopted by Ormiston J in Jam Factory Pty Ltd v Sunny Paradise Pty Ltd & Ors [1989] VR 584 at 591.
Conclusion
There is no doubt that if relief were to be granted Fingal would face significant challenges in the future including, but not limited to,
(i)the clause 14.3.3.3 issue;
(ii)the threat to its rights of renewal posed by clause 12.6.1;
(iii)the ongoing challenges (for the liquidator at present) of running a financially successful motel business; and
(iv)a landlord determined to fasten on any (lawful) reason to have Fingal removed as tenant as soon as possible.
Nevertheless, I am satisfied that Riviera has now received all to which it is entitled under the leases and that there are sufficiently good prospects that it will continue to be paid rent and outgoings and other amounts due under the leases on time into the future. When I weigh up the potentially very substantial and irretrievable detriment to Fingal in the event that relief were not to be granted as against the gravity of the breach upon which Riviera relied when exercising its right of forfeiture and re-entry, all of the other conduct of Fingal complained about and the consequences thereof for Riviera, I am satisfied that it is just and equitable to grant relief against forfeiture. There is insufficient about Fingal’s conduct as tenant (in the wider sense) and in the many criticisms levelled against Fingal and Mr Buff by Riviera, when all the circumstances are considered, to cause me to refrain from exercising the discretion to grant relief. I do not find the appointment of the liquidator, in the circumstances of this case, to be a bar to relief.
This is not a case which falls within that very limited category of cases where relief should be refused even though rent and other expenses have been brought up to date. It is not a case where it should be characterised as unconscionable on the part of Fingal to apply for and obtain relief against forfeiture. Indeed, it is a case where equity should exercise its traditional function of intervening to prevail upon the conscience of Riviera. It should do so to prevent Riviera from relying on a strict application of the law and taking advantage of Fingal’s breaches so as to unjustly acquire significant benefits at Fingal’s expense.
There will be an order for relief against the forfeiture of each lease. I will hear the parties further on:
(i)the form of the orders; and
(ii)the costs of the proceedings.

Year	Total Income	Total Expenses	Net Income
30 June 2010	3,100,026.82	2,602,898.67	236,379.97
30 June 2011	2,738,778.91	2,414,016.52	150,585.86
30 June 2012	2,840,766.65	2,450,975.58	234,162.96
31 December 2012 (actual)	1,360,290.70	1,215,965.04	84,174.22[78]
30 June 2013 (projected)	2,691,114	2,457,687	233,427