Rose v Batson Holdings Pty Ltd

[2004] NSWADT 268

CITATION:	Rose v Batson Holdings Pty Ltd & Anor [2004] NSWADT 268
DIVISION:	Retail Leases Division
PARTIES:	APPLICANT John Emmanuel Rose RESPONDENTS Batson Holdings Pty Limited and Laundy Investments Pty Limited
FILE NUMBER:	035020
HEARING DATES:	20/07/2004, 13/08/2004 & 6/10/2004
SUBMISSIONS CLOSED:	11/29/2004
DATE OF DECISION:	12/16/2004
BEFORE:	Molloy GB - Judicial Member
APPLICATION:	Claim for surrender of possession of premises
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Conveyancing Act 1919 Liquor Act 1982 Retail Leases Act 1994
CASES CITED:	Batson Holdings v. Rose [2002] NSW ADT 110 Batiste v. Lenin (BC200206073) Hayes v. Gunbola Limited (1988) NSW ConvR Hyman v. Rose (1912) AC 623 Ladies Sanctuary Pty Limited v. Parramatta Property Investments Limited (BC 9700399) Lam Kee Ying SDN BHD v. Lam Shes Tong (1975) AC 247 Love v. Gemma Nominees Pty Limited (1983) ANZ ConvR McDrury v. Luporini (2000) 1 NZLR 652 Mir Bros Projects Pty Limited v. 1924 Pty Limited (1980) 2 NSWLR Shiloh Spinners Ltd v. Harding (1973) AC 691 Southern Depot Company v. British Railways Board & Anor (1990) 2 EGLR 39 Stieper v. Deviot Pty Limited (1977) 2 BPR 9602
REPRESENTATION:	APPLICANT S W Balafoutis, barrister FIRST & SECOND RESPONDENTS J K Chippindale, barrister
ORDERS:	1. A Declaration pursuant to Retail Leases Act Section 72(1)(f)(iii) that the Applicant is entitled to terminate Lease registered 0542508 between the Applicant as Lessor and the First Respondent as Lessee in respect of the premises at Ground Floor, 724 Darling Street Rozelle, being Lot 2 in Strata Plan 69876, forthwith; 2. Order that the Second Respondent forthwith give up vacant possession of the premises to the Applicant; 3. I stand over for further consideration the relief sought in the Amended Application 035020 paragraphs 3 and 4; 4. Liberty is granted to either party to apply generally and to restore these proceedings and matters numbered 25027 and 35144 to the list before me (subject to availability) by application to the Registrar and on 7 days notice; 5. Costs reserved.

1 By Application filed 7 March 2003 the Applicant sought certain relief against the Respondents. The Application was formally amended 11 August 2004 and by that Amended Application the Applicant sought the following Orders:

1. A declaration pursuant to Section 72(f)(iii) of the Retail Leases Act 1994 that the Applicant is entitled to terminate the Lease (the Lease) between the parties in respect of the premises at Ground Floor 724 Darling Street Rozelle (the premises) forthwith

2. An order that the Second Respondent forthwith give up vacant possession of the premises to the Applicant

3. An order that forthwith upon the Applicant being given vacant possession the First Respondent make good the premises in accordance with the Lease

4. An order that the First Respondent pay the Applicant:

(a) a sum, to be calculated in accordance with the orders made on June 28, 2002 by Judicial Member Molloy in proceedings between the parties, for unpaid rent

(b) outgoings payable under the Lease but unpaid

(c) the Applicant’s costs of enforcing its rights under the lease, including but not limited to, legal costs

(d) damages

(e) interest

(f) the costs of these proceedings.

There are other proceedings pending in this Tribunal instituted by the Respondents (35144) and there is an extant order made by me 22 June 2002 ( Batson Holdings v. Rose [2002] NSW ADT 110) (25027).

2 Having regard to the claims and counter-claims it seemed to me appropriate to effectively split the hearing so that the Tribunal could determine whether or not the Applicant would succeed in its Amended Application in relation to paragraphs 1 and 2 and then see what flowed from that determination. Consequently, the hearing was confined to those issues, the Respondent contending that should this Tribunal find that there has been a breach of the Lease then it should grant relief against forfeiture.

Findings of Facts:

3 It is appropriate to firstly set out the facts in chronological order, identifying the appropriate relevant factors that bear upon the issues, particularly the issue of relief against forfeiture.

a) 26 March 1990: Ronald John Baldwin (“Baldwin”) becomes the owner of The Freehold Hotel known as the “Red Lion Hotel” (formerly known as the “Darling Street Hotel”)

b) 28 March 1990: Batson Holdings Pty Limited (“Batson Holdings”) acquires ownership of the liquor licence of the Red Lion Hotel

c) 29 May 1995:Batson Holdings enters into a Lease as Lessee with John Emmanuel Rose (“Rose”) to lease premises described in the Lease as part of Certificate of Title Volume 2736 Folio 45 being the whole of the ground floor of premises known as 724 Darling Street Rozelle. This Lease, which incorporated the terms of the Law Society lease with various additional clauses, was registered 0542508, was for a lease period of four years commencing 13 March 1995 and terminating 12 March 1999 with three-year options. It was conceded that Batson Holdings exercised the first three-year option (from 13 March 1999 to 12 March 2002) and also exercised the second three-year option (from 13 March 2002 to 12 March 2005). No fresh leases have been entered into pursuant to those admitted exercises of option.

Relevantly, the Lease contained the following provisions:
i) An obligation in Batson Holdings to pay 50% of the outgoings for local council rates and charges, water sewerage and drainage charges, land tax and insurance “for the land or the building of which the property is part …” (clause 5.1.2, additional clause 28.1 and Item 13)

ii) An obligation on Batson Holdings not to transfer the Lease without consent (clause 10.1). Importantly, clause 10.7 provided:

“Where the property is a retail shop [and there was no dispute that it was], the tenant can sublet, grant a licence or concession, share or part with the possession of the whole or any part of the property or mortgage or otherwise charge or encumber the tenant’s estate or interest in this lease only with the written consent of the landlord which can be refused in the landlord’s absolute discretion. Otherwise, the tenant cannot do any of these things”.
iii) Provision (in clause 12) that the Lease ends, relevantly:
“if the landlord lawfully demands possession of the property” [clause 12.1.3].
It was submitted that a lawful demand had been made because Rose had issued a Notice under Conveyancing Act 1919 Section 129. The Lease in clause 12.2. stated that the
“landlord can enter and take possession of the property or demand possession of the property if [relevantly] the tenant has failed to comply with a landlord’s notice under section 129 of the Conveyancing Act 1919 [clause 12.2.3] or the tenant has not complied with any term of this lease where a landlord’s notice is not required under section 129 of the Conveyancing Act 1919 and the landlord has given at least 14 days written notice of the landlord’s intention to end this lease”. [12.2.4].
In the circumstances, and as dealt with by this Tribunal in my decision Batson Holdings Pty Limited v. Rose [2002] NSW ADT 110, it appears plain that Batson Holdings held the relevant liquor licence for the Red Lion Hotel and the relevant liquor licence for the demised premises by virtue of a re-definition of the adjoining licensed premises, namely the Red Lion Hotel. There was no dispute that the demised premises were, and are, used as a bottle shop as part of the re-defined licensed premises of the Red Lion Hotel. Indeed, clause 6.1 and Item 16 of the Lease prescribed the permitted use of the demised premises as “liquor retailing”. The demised premises are situate adjacent to the Red Lion Hotel.

4 Continuing with the chronology:

d) 1 January 1997: Trinkaye Pty Limited (“Trinkaye”) becomes the owner of the liquor licence of the Red Lion Hotel

e) 24 September 1998: Batson Holdings exercises the first option for a further three year commencing 13 March 1999 and expiring 12 March 2002. No fresh Lease was entered into pursuant to that exercise of option

f) 7 December 2001: Batson Holdings exercises the second option for renewal extending the term from 13 March 2002 through to 12 March 2005. Again, no fresh lease was entered into pursuant to that exercise of option. A dispute arose between Rose and Batson Holdings regarding the method by which the new rent for the new term should be determined and this dispute was resolved, but in principle only, by my decision 28 June 2002 (referred to above) but no party has taken that further such that, as I understand it, there has been no final determination or agreement as to the rent payable from and after 13 March 2002

g) 3 May 2002: Trinkaye sells the Red Lion Hotel to Laundy Investments Pty Limited (“Laundy Investments”) and the whole of the issued capital in Batson Holdings is purchased by Laundy Investments. The formal Agreement for Sale of Assets (“the Agreement”) was Exhibit 2. The parties to this agreement were Trinkaye (as vendor), Ronald John Baldwin (“Baldwin”) as licensee, Batson Holdings and Laundy Investments. There is no need to trawl through the 35 page Agreement nor the numerous voluminous annexures – I was not addressed on most of the content of this document - but it is appropriate to make the appropriate following relevant observations:

i) By clause 2.1 Trinkaye sold to Laundy Investments the “Assets” which were defined as the “Plant and equipment, the Goodwill, the Hoteliers Licence (held by Baldwin), the Business Records, the Off-licence retail and the Land (which was the land on which was situate the Red Lion Hotel). The Goodwill was defined as meaning “all goodwill in respect of the Business” and the “Business” was defined as “the business of the Darling Street Hotel, also known as the Red Lion Hotel, conducted at 724-726 Darling Street Rozelle; and Darling Street Bottleshop” which clearly included the demised premises. I have no hesitation in concluding that the Agreement for Sale of Assets was a sale of inter alia the whole of the business conducted from the demised premises and included the transfer of the Lease

ii) The Agreement was interdependent with a contract of the same date in which Baldwin sold to Laundy Investments the land at 726 Darling Street Rozelle (occupied by the Red Lion Hotel). (Clause 7(a)

iii) There was a disclosure in clause 11 of the Agreement of the existence of the Lease, the exercises of option and the dispute relating to rental valuation to which I have made reference above

iv) Clause 12 dealt with the transfer of the Lease. Sub-clauses (a) – (d) inclusive were stated as follows:

(a) the parties intend that the landlord is to consent to a transfer of the Lease from Batson to the purchaser

(b) the purchaser must serve the transfer of lease within twenty-one (21) days before completion date

(c) the purchaser must:

i) supply references and other information reasonable required by the landlord to allow the landlord to consider the application for the transfer of the Lease

ii) pay the costs of the landlord including the landlord’s mortgagee arising from any negotiation between the landlord and the purchaser relating to the transfer of the Lease

iii) provide a suitable guarantee if reasonably required by the landlord to support the performance of the obligations of the tenant under the Lease.

(d) The vendor must apply to the landlord for the consent of the landlord to the purchaser becoming a tenant.

It was conceded that none of the above sub-clauses had been complied with and it was also conceded that the Agreement had been completed.

v) Clause 12(e) was relied on by the Respondents. This sub-clause is in the following terms:

e) Notwithstanding sub-clauses (i), (ii) (iii) and (d) herein in the event that the Landlord does not consent to the transfer of the Lease to the Purchaser the parties agree that the vendor will transfer its shareholding in the Lessee company to the purchaser or its nominee for the consideration of one dollar ($1.00) and the vendor will retire as a director or any officeholder of the Lessee company and the purchaser or its nominee will be appointed as director or any officeholder of the Lessee company and in the event that a personal guarantee has been given by Ronald John Baldwin for the performance of the Lease to the Landlord the purchaser and the purchaser’s directors will indemnify and will keep indemnified Ronald John Baldwin against any claims suits costs and compensation arising out of the breach or non-performance of the Lease by the purchaser or its nominee relating to any matter arising after Completion Date.:”

Further, Laundy Investments in fact purchased all of the shares in Batson Holdings from Baldwin and Mr Craig Laundy and Mr A Laundy replaced Baldwin as directors of Batson Holdings (as and from 27 May 2002 – see Exhibit “G”, Annexure “E”, Exhibit “3” para 9 and Exhibit “4” para 3, and Respondents’ written submissions para 10).

h) 30 May 2002: Laundy Investments becomes the business owner of the Hoteliers Licence for the Red Lion Hotel, 724-726 Darling Street Rozelle, and also becomes the licence owner and the premises owner of those licenced premises (as disclosed in the Licence Information Search 7 March 2003, part of Exhibit “E”), which premises ( it will be remembered) included the demised premises by the re-definition of the licenced premises

i) 5 February 2003: Rose sends to Batson Holdings (addressed to that company c/- the leased premises and separately addressed to its registered office, and again separately to the solicitors for Batson Holdings and again separately addressed to the occupier of the demised premises at the demised premises) a purported Notice under Conveyancing Act 1919 Section 129 (8). The document was the subject of argument as to whether it was sent or not and whether it properly amounted to a Section 129 Notice. As to the former submission I have no hesitation in saying that in my opinion the Notice was sent as deposed to by Rose in his affidavit 7 March 2003 (Exhibit “E”), and this conclusion is supported by the fact that the then solicitors for Rose wrote to the solicitors for Batson Holdings 7 March 2003 stating, inter alia:

“Mr Baldwin is no longer the licensee, Mr O’Leary is the licensee (in this respect we note that the premises bore a statutory sign to this effect on February 5, 2003 when the notice under section 129 of the Conveyancing Act 1919 was served but that it was absent yesterday with a sign saying Mr Baldwin was the licensee)”

and that rather bald assertion remained unchallenged in all future correspondence. In addition neither Baldwin nor Mr Arthur Laundy, in their affidavits or orally, sought to traverse or cast doubt upon the service of the Notice or assert that it had not been received by the persons to whom Rose swore the Notice was sent. The highest Baldwin would go was to say in cross-examination that he did not recall receiving it. There was some oral evidence from the solicitor for Batson Holdings to the effect that he received the Notice only when he saw it in Rose’s affidavit (Exhibit “E”) but he conceded that in February 2003 another solicitor was handling the Batson Holdings matters. The key evidence however was that of Rose, Baldwin and the correspondence and I am clearly satisfied that not only was the Notice served as asserted by Rose but that it was received as further asserted by him. In any event I note that Rose was not cross-examined on his assertion of service of the Notice.

As to the latter (ie whether it properly amounted to a Section 129 Notice) I shall deal with this aspect later in this Judgment.

j) 1 April 2003: Rose registers a Strata Plan, being SP 69876, in relation to land described as 722-724 Darling Street Rozelle and upon which land is situate the demised premises, the demised premises becoming Lot 2 on the ground floor of the described building, Batson Holdings having consented to the registration of that Strata Plan on 18 March 2003.

5 It was strongly submitted on behalf of both respondents that this document did not constitute a valid Notice under Section 129. There is nothing particularly magic about Section 129. Sub-section (1) makes it plain that a right of re-entry or forfeiture for breach of any covenant, condition or agreement in a lease, is not enforceable “by action or otherwise” unless or until the lessor serves on the lessee a notice that (relevantly) specifies the particular breach complained of and, if the breach is capable of remedy, requiring the lessee to remedy the breach, and the lessee fails “within a reasonable time thereafter” to remedy the breach if it is capable of remedy.

6 The purpose of Section 129 is plain: a lessee must be given the opportunity of remedying any breach that is capable of remedy. Where a breach is not capable of remedy then the lessor may claim compensation in money for the breach. It was not suggested that a claim for compensation was made but rather that the Notice in its terms required the lessee to remedy the various breaches alleged. One may not unreasonably conclude that the breaches alleged were of such a nature that a compensation claim “in money” could not be reasonably calculated, either because the breaches alleged had become irrelevant through the passing of time (ie, irrelevant from a monetary compensatable point of view), alternatively that some of the breaches were of such a nature that they were fundamental breaches which could not be cured by way of compensation “in money” but rather only by way of remedial action by the Lessee.

7 There was no dispute that the Notice met the requirements of Section 129(8) and the Sixth Schedule. The real substantive argument went to, not the format, but rather the content of the Notice. Firstly, the Notice asserted that there had been “no effective exercise of any of the options for the further terms commencing on 13 March 1995 or 13 March 2002”. This was clearly wrong and it was conceded by all parties that there had in fact been effective exercise of those two options (see chronology above) but that no leases had been entered into pursuant thereto. In my opinion that assertion, although made in this Notice, and albeit being incorrect, does not affect the terms of the Notice for these reasons: firstly, because it was unnecessary and therefore otiose and does not impinge upon the requirement to remedy as specified later in the Notice and, secondly, because the following paragraph states “that if, contrary to the Landlord’s assertions, there has been an effective exercise of the options aforesaid and because of that or for any other reason the Lease remains current valid and enforceable …” which in my opinion was the correct factual situation. For those two reasons in my view it could not be properly argued that Batson Holdings as lessee was misled in such a way that the Notice itself was vitiated by the unnecessary assertion relating to the option.

8 Next, the Notice pleaded a breach of the following covenants:

a) Not to part with possession or sublet without the written consent of the Landlord (clause 10.7 of the Lease)

b) Not to mortgage or otherwise charge or encumber the Lease without the written consent of the Landlord (clause 10.7)

c) To pay the share stated in Item 13A (50%) of the outgoings (Item 13 and clause 5.1.2 (incorrectly in the Notice stated as “15.1.2”)) set out above

d) Not to transfer the Lease without the consent of the Landlord (the lessor).

9 In my opinion each of those covenants is reasonably set out in sufficient clarity to identify the covenants about which the Lessor complains that the Lessee has breached.

10 The nub of the Notice is then set out in these terms:

I hereby give you notice and require you to remedy those breaches by:
1. Causing the discharge of the mortgage given to the ING Bank

2. Providing evidence of the discharge of the mortgage to the ING Bank

3. Causing the withdrawal of Caveat registered No. 6855722 lodged by ING Bank

4. Paying the sum of $15,184.73 (being the sum of the moneys payable pursuant to clause 5.1.2 of the Lease calculated in the manner set out in the enclosed schedule) to the Landlord forthwith; and

5. Recovering possession of the premises from the present occupant and providing evidence to the Landlord of the fact that you have recovered possession

6. Causing the transfer of the Lease to you by the person to whom you transferred it without the Landlord’s consent.

no later than 5pm on 28 February 2003 being a reasonable time hereafter by which to have rectified each of the breaches aforesaid.”

11 There was no argument that the time provided in the Notice was anything other than a reasonable time. There was some complaint about the fact that the Notice was dated 5 February 2002 but it is plain and obvious that this was a typographical error and the date should have been 2003, consistent with the chronology and consistent with the other material before the Tribunal. Again, it could not possibly be said that the Lessee or any of the others to whom the Notice was sent had been misled by that typographical error.

12 The problems with the Notice can be summarised in this fashion:

1) On 1 June 2000 Batson Holdings granted a mortgage to ING Bank NV over the Lease and “secured” that mortgage by Caveat 6855722. The grant of the mortgage was without the consent of Rose whose consent was never sought

2) Caveat 6855722 was withdrawn 27 May 2002 registered 9233858

3) Therefore, by February 2003 the mortgage to ING Bank had been granted and discharged and the caveat removed. Clearly paragraphs 1, 2 and 3 of the Notice were not capable of remedy, the time having passed for their remedy and in any event the remedy by 2003 having become irrelevant. There was no argument that the granting of the mortgage to Batson Holdings from ING Bank was a breach, and a clear breach, of clause 10.7 (set out above)

4) It was urged upon me that a Section 129 Notice should be strictly construed because a failure to comply with its terms prima facie entitles the lessor to a right of re-entry or forfeiture. I was referred to Mir Bros Projects Pty Limited v. 1924 Pty Limited (1980) 2 NSWLR at 925 and 926, particularly these comments:

i) “There is a consistent body of authority, in relation to notices under Section 129 … that the object of such legislation is, not only to place restrictions on, and to permit the giving of relief against forfeiture and re-entry, but also to place the tenant in a position of knowing what is alleged against him and what is demanded of him so as to enable him to elect what shall be his subsequent conduct… The authorities are, however, also consistently to the effect that, notwithstanding the objects of such legislation, a notice is not invalidated because it specifies, as a breach, a “breach” which has not occurred or because it requires to be done something which the lessor cannot then lawfully require of his lessee” (at page 925)

ii) and at page 926 that the law is “not only that a notice under the Act is not bad because it demands more than is due … but that where a demand is made for a larger amount than that which is really due, such demand does not do away with the necessity for tendering what is actually due, unless there is at the same time refusal to receive less”.

5) I must say that absent that authority I would have formed the clear opinion that a notice purporting to be under Section 129 that required a lessee to do an act that the lessee was incapable of doing, was an invalid notice. After all, the whole purpose of Section 129 is to require a lessee to remedy a pleaded breach, alternatively to claim compensation for that pleaded breach. If there is no breach then it would seem to me that the notice would be invalid. Indeed, that must be the case if the only breaches pleaded were breaches that are not capable of remedy because the breaches had been “cured” (as in the case of the ING Bank mortgage).

13 However, there is no requirement for me to delve further into this aspect. Whatever defects there may be in paragraphs 1, 2 and 3, and whether or not those paragraphs had any force and validity, the plain fact is that paragraphs 4, 5 and 6 do not suffer from legal impediments.

14 Dealing with paragraph 4, this claimed $15,184.73 being the 50% of the outgoings pursuant to clause 5.1.2 and Item 13 (see 3(c)(i) above). Rose gave evidence that this sum was made up from monetary calculations of Leichhardt Council rate notices from 1 July 1999 through to 30 June 2003 and from insurance premiums paid by Rose in respect of land of which the demised premises formed part. It was not suggested that the sum claimed was not a correct calculation and although he was cross examined on this point there is no doubt in my mind that his evidence is to be accepted and the amount of $15,184.73 is properly calculated and is payable by the Lessee pursuant to the said terms of the Lease.

15 I have accepted, and clearly accepted, that the Notice was properly served. It is curious, to say the least, that neither Batson Holdings or Laundy Investments have ever paid, or offered to pay, the amount claimed to Rose. It is peculiar that, although the Lease makes it absolutely crystal clear that the Lessee is obligated to make the payment, no attempt has ever been made to pay Rose even up to and including the hearing date. That, in my view, is a factor that weighs heavily in relation to the Respondent’s claim for relief against forfeiture – it is not entirely a matter that I should ignore even though there are (in my view) more pressing aspects relating to that sought relief. However, there is a clear breach of the Lease and a clear continuing failure to pay. Consequently, the Notice in relation to that claim must be valid.

16 Pausing at this point it is worthwhile making the following observations:

1) The Notice in its terms referred to a “schedule” in which it was said the amount claimed was calculated. No such schedule was produced. Rose said that he prepared the schedule but had since moved offices – presumably the schedule had been lost. He annexed to his second affidavit (Exhibit “F”) the rate notices and insurance accounts from which he calculated the $15,184.73. I am absolutely satisfied that the calculations pursuant to Lease clause 5.1.2 and Item 13 are correctly made (there was no argument raised to the contrary) and that therefore the quantum in Notice para.4 is correct and due at as 5 February 2003. Whether the schedule was attached or not seems to be irrelevant having regard to the judicial statements of Mir Bros (set out in 12(4) above) and the fact that, in any event, the amount claimed is correctly calculated

2) No evidentiary challenge was made, by either Baldwin or Mr Arthur Laundy, to the calculations nor to the assertion that the sum so calculated had not been paid nor, and more importantly, to the assertion that it was properly payable pursuant to the terms of the Lease

3) Furthermore, there was no assertion by either Respondent that the amount had in fact been paid. Indeed, Ms Donnelly, the accounts manager for Laundy Investments, swore an affidavit 27 August 2004 which made no reference at all to the $15,184.73. This is so notwithstanding the assertion by Rose in his affidavit 7 March 2003 (over 17 months earlier) that the sum had not been paid (Exhibit “E”, para 5) and notwithstanding that both Batson Holdings and Laundy Investments are represented by the same solicitor and counsel in these proceedings and the fact that Laundy Investments has received a copy of the Notice (see Exhibit “4”, para 9) and makes the monthly rental payments to Rose (Exhibit “4”, para 8).

17 It is now appropriate to deal with breaches 5 and 6. The Applicant alleged that at the very least Batson Holdings had shared possession of the demised premises with Laundy Investments. It was alleged that there was not only a sharing of possession but also the granting of a licence and/or parting with possession of the demised premises without consent. It was submitted that these activities took place firstly in 1997 when Trinkaye became the owner of the liquor licence for the hotel; and it was alleged that it happened again in 2002 when Laundy Investments became the owner of the liquor licence. There was no argument that when Trinkaye became the owner payment of the rental was made to Rose by Trinkaye and there was no argument that when Laundy Investments became the owner payment of the rental was made to Rose by Laundy Investments.

18 It was strongly submitted on behalf of the Respondents that there was no parting with possession, granting of a licence or sharing simply because all that happened was a transfer of the shares in Batson Holdings to Laundy Investments consistent with clause 12(e) of the Agreement for Sale of Assets (set out above). Consequently, it was submitted, the Respondent Batson Holdings remained the lessee and had not parted with possession, remained on the title as Lessee, granted consent to the registration of the Strata Plan as Lessee and the fact that the rent is paid by Laundy Investments was not relevant to the legal title. The difficulty with that submission in my view is that it avoids the terms of the Agreement. That document makes it plain (in my view) that Trinkaye owned the plant and equipment, the goodwill, the hoteliers licence, the business records, the off licence resale and the Land the subject of the Sale Agreement. The “Land” was the hotel at 726 Darling Street Rozelle. The “off licence (retail)” was the dormant bottle shop licence in relation to the demised premises. The “Business Records” was to defined as “the current operational records relating to the Assets or the Business” and the “Business” was described as (relevantly) the business of the Red Lion Hotel “conducted at 724-726 Darling Street Rozelle and Darling Street Bottleshop”; the “Goodwill” was described as “all goodwill in respect of the Business” and the “Plant and equipment” was described as (relevantly) “all the items of furniture, plant and equipment used in or relating to the business at the premises and the leased premises” which latter was described as “the premises subject to the lease”, ie the demised premises. Furthermore, by clause 5 completion of the agreement was to take place after the transfer of the relevant liquor licences to the nominee of Laundry Investments “shall be unconditional”.

19 Assuming, for the sake of argument, that there was not in fact a transfer of the lease but rather a mere purchase of the whole of the issued capital in Batson Holdings (the lessee) that argument avoids the clear terms of clause 10.7 of the Lease. It was not suggested, and could not be suggested, that the effect of the Agreement placed Laundy Investments in the position of the occupier of the demised premises and conducting there from the business of Batson Holdings. As I have pointed out above, as at 30 May 2002 Laundry Investments became the “Business Owner” and the “Licence Owner” and the “Premises Owner” relating to the hoteliers licence for not only the Red Lion Hotel but also the demised premises which, it will be remembered are part of the extension granted to the hoteliers licence. In addition, Mr O’Leary became the licensee as at 30 May 2002, he being the nominee of Laundy Investments. It is the licensee (as I understand it) who in fact is primarily responsible for compliance with the terms of the Liquor Act 1982 and the various requirements that relate to the holding of an hoteliers licence such that at the very least it must be concluded that Mr O’Leary as nominee was in possession of the demised premises. In my opinion Laundy Investments (as the nominator) was in possession and I really cannot understand an argument to the contrary. Batson Holdings certainly was not “in possession”. It was certainly not carrying on the business from the demised premises – and although it was put to me at the very least I should conclude that Batson Holdings was sharing possession I am of the clear view that Batson Holdings had parted with possession of the demised premises to Laundy Investments. Otherwise, I cannot see how Laundy Investments would ever have obtained the benefit of the Agreement and would ever be able to conduct the liquor business from the demised premises, bearing in mind (again) that the Licensing Court redefined the liquor licence to extend it to include the demised premises.

20 Consequently, in my view there has been a clear breach of clause 10.7, which breach has not been rectified.

21 The breach pleaded in paragraph 6 (causing a transfer of the lease) is not made out because in fact there has been no transfer but rather a parting of possession. No formal document evidencing a transfer was before me and I cannot see that this complaint is made out. (There may be some sort of equitable transfer but I was not addressed on this and there is no need for me to travel down that path). The clause itself is inelegantly drafted and probably somewhat confusing, but in my view it really does not matter because I am not satisfied that there has been a “transfer of the lease” but rather a parting with possession.

22 It follows from those conclusions that the Section 129 Notice is a valid Notice and required the Lessee Batson Holdings not only to pay the $15,184.73 but also to recover from Laundy Investments the premises. There is good reason for that because the contract, ie the lease contract, is between Rose and Batson Holdings for the occupancy of the demised premises by Batson Holdings.

Relief against Forfeiture – the law:

23 Once one accepts that Batson Holdings breached the terms of the Lease, that it was served with a Notice under Conveyancing Act 1919 Section 129, that the Notice is valid and that Batson Holdings has not complied with that Notice and continues to not comply and continues to be in default, then one moves on to consider whether Batson Holdings is entitled to relief against forfeiture.

24 It seems that conduct which agitates an argument for this type of relief falls into two categories. Firstly, where a lessee fails to pay rent. Secondly, wilful breach of the lease in some other respect, ie a breach of covenant or a breach of a negative obligation as in this case (ie not to sub-let or part with possession etc).

25 There is also no doubt that relief of this nature is equitable relief, that it is discretionary and that the court/tribunal can take into account all relevant matters that bear upon the exercise of that discretion. Section 129(2) makes it plain that in the relevant circumstances the Tribunal can grant relief

“having regard to the proceedings and conduct of the parties (under sub-section (1)) and to all the other circumstances” and the Tribunal “may grant or refuse relief, as it thinks fit; and in the case of relief may grant the same on such terms (if any) as to costs, expenses, damages, compensation, penalty or otherwise, including the granting of an injunction to restrain any like breach in the future, as the (Tribunal) in the circumstances of each case thinks fit”.
The width of the discretion is plain from the sub-section and is also plain from the principles as set out in numerous cases. For example in Love v. Gemma Nominees Pty Limited (1983) ANZ ConvR 68 at 69-70, Burt CJ said:
“The jurisdiction … is undoubtedly discretionary. This is so whether the jurisdiction is based upon the statute or upon the ordinary law or practice of the Courts of Equity. The discretion is sometimes said to be unfettered. That cannot be taken literally. It is a jurisdiction which must be exercised judicially and this at least means that in the exercise of it one must have regard to the purpose to be achieved by it and one cannot have regard to matters which are foreign to that purpose. The purpose can only be expressed in general terms as by saying that it is to be exercised “to prevent one man from forfeiting what in fair dealing belongs to someone else, by taking advantage of a breach from which he is not commensurately and irreparably damaged” … It is not the purpose of the jurisdiction “to relieve against men’s bargains” … On the contrary the general rule is that “contractual promises should be observed and contractual rights respected” … to obtain relief a person seeking it must show that relief is “appropriate” and that “involves consideration of the conduct of the applicant for relief, in particular whether his default was wilful, of the gravity of the breaches, and of the disparity of the value of the property of which forfeiture is claimed as compared with the damage caused by the breach” … And there may, no doubt, be other considerations and no one consideration can be decisive.”

26 Generally speaking applications for relief against forfeiture are received by the Courts/Tribunal generously, not with any preconceived idea but rather with a view to ensuring, as best possible, that no injustice is done by the strict application of Section 129(1). It is plain that one needs to look at the conduct of the parties and in particular that of the applicant for relief (the lessee) in relation to the lessor and in relation to the demised premises. As Glass JA pointed out in Stieper v. Deviot Pty Limited (1977 2 BPR 9602):

“the conduct of the lessee in relation to the premises is seemed to be a matter of particular relevance in determining whether it is just and equitable to impose the relationship on an unwilling lessor. The circumstances which may demonstrate inequity are not limited to those which establish equitable defences nor are they capable of relegation in advance to fixed categories”.

27 In Shiloh Spinners Ltd v. Harding (1973) AC 691 the House of Lords made it plain that it is necessary “to consider the conduct of the assignee, the nature and gravity of the breach, and its relation to the value of the property which might be forfeited. Established and … sound principle requires that wilful breaches should not, or at least should only in exceptional cases, be relieved against, if only for the reason that the assignor should not be compelled to remain in a relation of neighbourhood with a person in deliberate breach of his obligations” (at 725).

28 Both parties placed considerable reliance upon Batiste v. Lenin (BC200206073), a decision of the NSW Court of Appeal 27 September 2002. In particular, reliance was placed upon paragraph 56 which quoted with approval the speech of Lord Wilberforce in Shiloh (quoted relevantly above), and paragraph 63 when the Court said: “… the lessor should not be compelled to remain in a relation of neighbourhood with a lessee in deliberate of its obligations” and that should be coupled again with the further observations of Lord Wilberforce in Shiloh (quoted again at paragraph 56) where His Lordship said that all the material

“establishes a case of clear and wilful breaches of more than one covenant which, if individually not serious, was certainly substantial: a case of continuous disregard by the respondent of the appellants’ rights over a period of time, coupled with the total lack of evidence as to the respondent’s ability speedily and adequately to make good the consequences of his default, and finally a failure to show any disproportion between the expenditure required and the value of the interest involved as to amount to a case of hardship”.
At paragraph 36 the Court noted the decision of the trial judge Bryson J. who set out in his judgment what he described as “very significant breaches of the lease”. There is no need for me to go through the various breaches itemised by His Honour and adopted by the Court of Appeal. Bryson J concluded that
“Overall, these breaches have in my view evinced an intention of (the lessee) not to comply with the terms of the lease; in the case of rent and outgoings, not to comply except on terms imposed by the lessee which involved delays and difficulties of collection, while in the case of works relating to fire orders, having regard to the time which has elapsed and the altogether inadequate explanations put forward by (the lessee), accompanied by a contention for which there was no real basis that it is not possible to comply with the fire orders, it must be concluded that this important part of the lessee’s obligations has been entirely repudiated and there is no real prospect of the lessor ever obtaining compliance with it. In the circumstances my conclusion is that the lessee has repudiated the lease and that that repudiation was accepted by initiating the cross-claim”.
Of course repudiation is not an issue in this case but the purpose of the reference is to demonstrate that there was a litany of problems that amounted to breaches of the lease and which in all cases had not been remedied, and the Court of Appeal stated that it was “not persuaded that (Bryson J’s) discretion refusing relief against forfeiture miscarried particularly where the lessee repudiation of the lease is brought into account”.

29 Both parties also made reference to Lam Kee Ying SDN BHD v. Lam Shes Tong (1975) AC 247. In that case the Privy Council considered an appeal from the Federal Court of Malaysia brought by lessors arising out of a breach by lessees of a lease covenant

“not to assign underlet or part with the possession of the demised premises or any part thereof without prior written consent of the lessor such consent not to be unreasonably withheld)” and to “use the demised premises for carrying on business as general merchants whether trading as a sole-proprietor or in partnership thereof”.
The lease granted the lessor a right of re-entry upon any default by the lessee the observance and performance of any of his covenants. The sole issue for determination by the Judicial Committee was whether there was a “parting with possession of the demised premises” (at 255). As I read the facts the original lessee carried on a business from the demised premises trading in partnership with others. The lessee and his partners formed a limited company for the purpose of acquiring as a going concern the business carried on by the partnership. Supply of electricity and water to the partnership was discontinued and fresh agreements were made for their supply to the company. The telephone service was also put into the name of the company and a signboard bearing the company’s name was erected outside the premises. Receipts, bills and invoices were issued in the name of the company. The company ultimately tendered to the lessor as payment of rent for the business a cheque drawn by the company. This brought to the knowledge of the lessor that the company was occupying the demised premises and the lessor then commenced an action in the High Court of Malaya claiming possession of the premises for breach of the covenant not to part with possession, naming the lessee and the company as defendants. Both defendants denied any breach of the covenant and in the alternative counter-claimed for relief against forfeiture.

30 The Judicial Committee determined (at 257) that

“the proper conclusion to the drawn from the whole of the evidence … is that the (lessee) did part with possession of the premises”. The Judicial Committee commented (at 255) that “it could not be disputed that the (lessee) has permitted (the company) to occupy the premises. Counsel for the respondents …. did not place any reliance on the fact that the (company) was a company controlled by the lessee in submitting that there had been no parting with possession. Their submissions were based upon a number of cases in which it was held that a lessee who retains the legal possession does not commit a breach of a covenant against parting with possession by allowing other people to use the premises;” and at 256: “a covenant which forbids a parting with possession is not broken by a lessee who in law retains possession even though he allows another to use and occupy the premises”. However, in this case, the Judicial Committee found (at page 256) that “some of the evidence – as to the erection of the signboard, the transfer of the electricity, water supply and telephone and the issue of receipts, bills and invoices in the name of the (company) – is equivocal and is quite consistent with a conclusion that although the (company) occupied the premises the (lessee) retained possession. However, the fact that the (company) tendered its own cheque in payment of the rent is some evidence that the (company) regarded itself, and was regarded by the (lessee), as having possession of the premises. Even more significant in their Lordships’ opinion is the fact that at no time before the trial or in evidence did the respondents (ie the lessee and the company) give an unqualified denial that the (lessee) had parted with possession to the (company). In their solicitors’ letter …. , in their defence and in evidence the reply given by the respondents to the claim that they had broken the covenant was not that there had in fact been no parting with possession but there had been no parting with possession because the (lessee) was a major shareholder in the (company). If in truth the (company) had merely been given a licence to occupy the premises, and the (lessee) had retained possession, would have been easy for someone to say so. The other evidence that is in itself equivocal is to be understood in the light of the fact that the respondents, who could have produced affirmative evidence that the (lessee) retained possession if that had been the fact, failed to do so. In their Lordship’s opinion the proper conclusion to be drawn from the whole of the evidence in the case … is that the (lessee) did part with possession of the premises”.
And therefore there was a breach of the covenant.

31 However, the Judicial Committee granted relief from forfeiture. At 258 the Judicial Committee said this:

“The (company) which was formed to take over the business of the (lessee) carried on upon the demised premises the same business in the same manner as before. The shares in the (company) were held by the three persons who had previously traded in partnership, one of whom, the lessee, had a substantial majority of the shares. Although a lessor is not bound blindly to give his consent to an assignment of a lease to any company which the lessee may form to carry on his business, and although in some cases of that kind where an assignment ought to be permitted it may be prudent for the lessor to require guarantees from the lessee, in the circumstances of the present case it would have been unreasonable for the (lessor) to withhold its consent to an assignment of the lease to the (company) had that been sought”.
In the case now before the Tribunal it is relevant but not determinative (in my opinion) that the clause in question in Lam Kee Ying provided for a right to assign, underlet or part with possession only with the prior written consent of the lessor but also provided that “such consent not to be unreasonably withheld” – the clause in the Lease now the subject of consideration (10.7) is not in those terms and provides that consent can be refused “in the landlord’s absolute discretion”.
Furthermore the clause goes on: “ Otherwise the tenant cannot do any of these things ”, namely subletting, granting a licence or concession, sharing or parting with possession of the whole or any part of the property … (etc).

32 The same situation arose for consideration in Ladies Sanctuary Pty Limited v. Parramatta Property Investments Limited (BC 9700399), a decision of Windeyer J 4 March 1997. The lease in that matter also provided for similar consent to be not unreasonably withheld. A Section 129 Notice had issued alleging assignment without consent, failure to keep up certain insurance and entering administration with the intention of entering an arrangement with creditors. At pages 10-11 His Honour made this observations:

“The application for relief is made under s129(2) of the Conveyancing Act 1919 . This gives the Court a wide discretion the considerations which should guide the exercise of such discretion being generally set out in Hyman v. Rose (1912) AC 623 , those considerations being somewhat different with the event giving rise to forfeiture is breach of covenant other than the covenant for the payment of rent. Considerable reliance was placed by the defendant (the lessee) on the leading case of Shiloh Spinners v. Harding (1973) AC 691 which has been referred to and in effect generally followed in this country; see for example Stieper v. Devoit Pty Limited (1977) 2 BPR 9602 ; Hayes v. Gunbola Limited (1988) NSW ConvR 55-375 . It is however important to remember as is pointed out by the authors in Meagher Gummow and Lehane, 3rd Edition, in para 1807 and in [ Southern Depot Company v. British Railways Board & Anor (1990) 2 EGLR 39 ] that the jurisdiction for relief here being a statutory one the statement in Shiloh as to wilful breach of covenant only justifying relief in exceptional cases is not authority for the basis of exercise of discretion in statutory cases, although the wilfulness of the breach is something to be taken into account in determining whether or not relief should be granted. It is important to take it into account as otherwise the court might be thought to encourage breach of the covenant against assignment without consent if no additional considerations were to be taken into account on a relief against forfeiture claim than those to be taken into account in determining whether consent to assignment was wrongly withheld”.
His Honour considered a number of factors that in his view weighted heavily against the granting of relief against forfeiture. His Honour considered that there were “proper grounds to refuse consent” to the assignment and His Honour set out at pages 11 and 12 six factors which in his opinion outweighed the three factors (including the fact that rent was paid to date) that would weigh against the granting of relief.

:

33 It is now appropriate to shortly analyse the facts in relation to the issue of relief against forfeiture. Firstly, all parties clearly knew of the terms of clause 10.7. Although there was some oral evidence given to the effect that the lease had not been read by Mr Batson, all parties are in business, the lease has been in operation since 1995 and it is stretching credulity to suggest that somehow or other the parties were not aware of its terms. Secondly, and in further support of that conclusion, one only needs to look at the Agreement, clause 12 (relevantly set out above at 4(g)(iv) and 4(g)(v)) together with a number of other clauses: 8 (giving a right to the purchaser to employ all or any of the employees of the vendor); 14 (giving the purchaser full and free access to the property and the business records so that the purchaser “can become familiar with the business” (which included the Darling Street bottleshop)); 2 (when the vendor sold to the purchaser the “Assets” (which included the goodwill and the hoteliers licence); and 15 (which required the consent of the Licensing Court to the transfer of the hoteliers licence and the off-licence (Retail) Licence). It was never an issue that the Licensing Court had in fact granted the necessary consents and it was never an issue that in fact the Agreement had been completed and, most importantly, it was never an issue that in fact Laundy Investments was operating the bottleshop from the demised premises (see in particular Exhibit 4, para 6 and 8).

34 Thirdly, this was not a case similar to that of Lam Kee Ying. The shares in Batson Holdings had been totally transferred to Laundy Investments and Mr Craig Laundy and Mr Arthur Laundy replaced Baldwin as directors of Batson Holdings. Consequently, an entirely new entity with new shareholders was actually occupying the demised premises and trading from those premises, an entity totally different from the entity with whom Rose had entered into a lease contract on 29 May 1995 commencing 13 March 1995. Although it is true that Batson Holdings remained as the registered lessee a further factor is that the rent was and is currently paid by Laundy Investments.

35 Fourthly, although it is further true that Baldwin is the guarantor, there was no financial evidence adduced to the Tribunal relating to his financial circumstances; rather, the evidence disclosed that he had disposed of the whole of this shareholding in Batson Holdings and was not conducting the bottleshop business from the demised premises . It is true that Batson Holdings granted consent on or about 18 March 2003 for the registration of the Strata Plan but the Tribunal was informed that prior to that consent being granted Rose made an application for an urgent interim order in that regard.

36 Fifthly, the evidence showed that Batson Holdings “has no assets” other than it being the Lessee of the demised premises – see Exhibit 5, para 6. Batson Holdings has divested itself of its assets by selling its business to Laundy Investments.

37 Sixthly, no attempt has been made by Batson Holdings (or indeed Laundy Investments) to pay the outstanding outgoings. There was no argument that the money was due – there was some submission to the effect that the Section 129 Notice should have, or did or did not, contain a Schedule showing how the amount claimed was made up – but the plain fact is that the amount was in fact due and payable and remains due and payable.

38 Seventhly, it is plain that if relief is granted then there will be no effective remedy available to Rose in the future. This Tribunal would be endorsing the situation with Laundy Investments in circumstances where Batson Holdings has divested itself of its assets by selling its business to Laundy Investments and there is no lease contract between Rose and Laundy Investments. The situation would be therefore that Rose would be leasing the demised premises to a company which has no assets. In the event of a further default Rose would be placed in a very difficult position in the event that he wished to sue Batson Holdings for damages, alternatively should he wish to recover possession from a company occupying the premises without his consent.

39 Finally, it is clear that the actions of Batson Holdings coupled with the actions of Laundy Investments, constituted a wilful breach of the lease. The importance of consent was clearly in the mind of the parties when they signed the Agreement, particularly having regard to clauses 11 and 12 . Clause 12(a) made it plain in its terms: “the parties intend that the landlord is to consent to a transfer of the lease from Batson to the purchaser”. There was no evidence at all that any application had been made to Rose for his consent. In his initial affidavit 7 March 2003 (Exhibit “E”) he deposed to never having been asked for any consent to assign or transfer the lease, to sub-let the demised premises or part with possession of the demised premises. He was never cross-examined on that paragraph. No evidence was led to the contrary. It is therefore plain that Batson Holdings and Laundy Investments not only totally ignored the lease contract but also brought to the task wilful blindness in circumstances where they cannot rely (in my opinion) on clause 12(e) relating to the transfer of the shareholding in Batson Holdings. This sub-clause is predicated on the basis that Rose “does not consent to the transfer of the Lease to (Laundy Investments)”. But if no application is made to him for his consent then the predication does not come into effect such that sub-clause (e) in my opinion cannot be relied upon.

40 I have therefore formed the clear view that I should not grant relief against forfeiture.

Other Submissions/Aspects:

41 In reference to a number of other submissions and issues that were raised during the course of the hearing, it is appropriate to deal with those here and now. Firstly, there was an initial submission on behalf of Batson Holdings and Laundy Investments to the effect that a failure to grant relief against forfeiture would result in some sort of negative result against the hoteliers licence. Section 129(3) states clearly that the

“provisions of sub-section (1) shall not extend to a covenant or condition or agreement against doing, committing, or suffering anything whereby or by means whereof either by loan or with other circumstances any licence under the Liquor Act 1982 is or may be endangered, or is or may be liable to lapse or be suspended, cancelled or refused”.
In the course of making final submissions counsel for Batson Holdings and Laundy Investments indicated clearly that the Liquor Act argument was not pressed.

42 Secondly, a question arose on whether Laundy Investments, not being a lessee, ought to be a party to the proceedings. The Retail Leases Act refers specifically to lessors and lessees and does not appear to include persons whose interest would otherwise be effected by a finding or determination of this Tribunal. In my opinion Laundy Investments is properly a party because, firstly there is no question that it was, and is, operating the bottleshop business from the demised premises and secondly, because Laundy Investments clearly has an interest in the dispute – jurisdiction is determined more by the nature of the subject matter than by the name or description of the respondent. There is no need to make a final determination on this issue simply because all parties seem to be of the view that Laundy Investments was a proper party to these proceedings for the reasons set out above; although it may well be that if Laundy Investments were a trespasser, as distinct from a purchaser from a lessee, then it would probably not be permitted to be a party.

43 Thirdly, the strongest part of the submissions on behalf of Batson Holdings and Laundy Investments was that all that had happened was simply that Laundy Investments had acquired the whole of the issued capital of Batson Holdings. In these circumstances it was submitted that there was no assignment, sub-letting, parting with possession or whatever because Batson Holdings remained the lessee, albeit its shareholding was now owned by somebody other than the shareholding owner at the time the lease was entered into. For the reasons set out above I am clearly of the view that the facts do not support that simple characterisation.

44 Fourthly, the respondents strongly submitted that “there was no evidence that the notice under section 129 of the Conveyancing Act 1919 was served in accordance with (the) Conveyancing Act or at all”. This submission was made on more than one occasion. The evidence of Rose was that he “caused” the Notice(s) to be served. This is a commonly used expression when referring to service of documents and requires traversal. No serious attempt was made to challenge Rose on his assertion and no cogent evidence was led by way of denial or traverse. In my opinion there was sufficient evidence, more than sufficient, to satisfy me that the Section 129 Notice(s) were served.

45 Fifthly, the respondents submitted that there was a waiver, alternatively or in addition, an estoppel. In my view, there is no conduct that is capable of amounting to an estoppel. Rose was required to give his written consent. He never did. He was never asked to. There was no evidence of reliance or detriment. There was no conduct of Rose upon which Batson Holdings could have relied in relation to the parting with possession. Although it is true that Trinkaye and later Laundy Investments had paid the rent and Laundy Investments continues to pay the rent, continued acceptance of rent may not be a waiver. In McDrury v. Luporini (2000) 1 NZLR 652 the New Zealand Court of Appeal held, in circumstances where the lessee was in breach of a fertilizer covenant, the required amount of fertilizer not having been applied by the end of the first year of the lease, and where the lessor continued to invoice the lessee for rent and the rent so invoiced was paid and accepted, and where the lessee had served the equivalent of a Section 129 Notice, although the lessor had known that the lessees were in breach the lessor had not, by accepting rent prior to the issue of the statutory notice and during its currency, waived their right to forfeit the lease if and when the notice had expired unfulfilled. The court said that the very service of the notice made it clear that the lessors were asserting a right to forfeit if the notice was not complied with. The acceptance of rent during the running of the statutory notice could not be regarded as an election not to exercise their contingent remedy of forfeiture. Nor could there be any estoppel preventing such forfeiture arising from the acceptance of rent during the running of the notice.

46 Whatever may have been the position relating to Trinkaye the plain fact of the matter relating to Laundy Investments is that the Agreement was made 3 May 2002, it was subsequently completed on a date not clear from the evidence but presumably in 2002, rent was paid from the completion date at least by Laundy Investments but these circumstances in my opinion are not sufficient to amount to waiver nor to any form of estoppel. As the New Zealand Court of Appeal pointed out in McDrury at page 664, paragraph 43, the

“fundamental starting point, and this can sometimes be overlooked, is that it is not the lessee’s breach which is being waived; rather it is the lessor’s right to forfeit and re-enter. The lessor is not waiving the lessee’s wrong; rather the lessor is choosing between two inconsistent remedies for that wrong. The choice is between affirming the lease and bringing the lease to an end. It is axiomatic that the whole question of waiver only arises, in the present context, following a breach of the lease by the lessee. If, with full knowledge of the breach the lessor, having the right to forfeit unequivocally indicates that the lease will not be forfeited, the law holds the lessor to that choice by the doctrine of waiver in its present sense of election”.

47 In the present case one breach complained of is the breach of the covenant to pay 50% of the outgoings. It cannot possibly be said that Rose had waived that breach or that by accepting rent from Laundy Investments he unequivocally indicated that the lease would not be forfeited for that breach. After all, he issued a Section 129 Notice pleading that breach. In addition, it seems to me that the mere acceptance of rent does not operate as a waiver. Indeed, a lessor would be commercially inept if he/she/it did not accept rent when tendered. A lessee would complain, justly so, if rent when tendered by whoever was not accepted. However, the mere acceptance of rent does not waive breaches of the lease about which the lessor complains. In this case there were two primary complaints: the failure to pay 50% of the outgoings and the parting with possession etc. There is no scintilla of evidence that would support a finding of waiver nor a finding of estoppel. In any event, waiver would only arise after the Section 129 Notice had expired. The evidence shows that a week later Rose commenced these proceedings in this Tribunal.

48 Sixthly, there was some muted suggestion that, by Batson Holdings grant of consent to the registration of the strata plan (see 4(j) above) Rose had accepted that Batson Holdings was the “real” lessor and therefore somehow Rose was estopped from alleging the breaches of which he complains. If that argument was seriously put then I reject it. It does not amount to either a waiver or an estoppel, it avoids the fact that Batson Holdings only consented (as I am informed from the bar table) only after Rose commenced proceedings in this Tribunal to compel consent and in any event avoids additional clause 18 of the Lease.

49 Seventhly, it was submitted on behalf of Rose that there were other breaches that would have entitled Rose to demand and enter into possession under Lease clause 12.2.3 and/or 12.2.4. It is appropriate to bear in mind that clause 12.2.2 gives power to Rose to “enter and take possession of the property or demand possession of the property” if “rent or any other money due under this lease is 14 days overdue for payment”. Once one accepts that the Section 129 Notice is valid with respect to the claim for 50% of the outgoings then in my view clause 12.2.2 kicks into effect. There is no doubt that the $15,184.73 falls within 12.2.2.

50 Eighthly, in their supplementary written submissions 19 November 2004 the respondents submitted that it was “apparent …that no new lease has been executed although it is equally apparent that the applicant has continued and continues to accept payment of rent. There is no suggestion that the rights of third parties have intervened and that the parties cannot be restored to their present position”. This submission cannot be accepted. Laundy Investments is a third party which is in occupation of the demised premises without the consent of Rose, without even the courtesy of seeking his consent, and in circumstances where, in addition, the whole of the shareholding in Batson Holdings has been transferred – it cannot reasonably be contended (in my view) that rights of third parties have not intervened.

51 In any event, this submission is contradicted by their submission as to the orders that should be made. I invited the parties to submit a form or forms of orders that the Tribunal could make if I found against the respondents on the factual aspects. The respondents submitted that the Tribunal could, or should, make the following orders:

1. That a declaration that in the events that have happened there remains in force a lease between the applicant, Rose and Batson Holdings Pty Limited in terms of the original document executed on 21 May 1995 and registered number 542508K

2. A declaration that the options to the aforesaid lease have been validly executed and that the lease remains in force and effect

3. A declaration that despite any breaches of the terms of the aforesaid lease, the aforesaid lease remains in force and effect

4. An order that despite any breaches of the aforesaid lease, the second respondent is entitled to relief against forfeiture of the aforesaid lease

5. An order that the applicant forthwith execute in favour of the second respondent a lease of the demised premises in accordance with the provisions of the aforesaid lease

6. An order that the second respondent pay to the applicant all future rent and outgoings in respect of the aforesaid lease in Order 5 and that the making of this order be conditional on the second respondent paying such rent and outgoings pursuant to the aforesaid lease

7. That there be no order as to costs in relation to the present proceedings before the Tribunal

8. There be general liberty to apply to all parties on such notice as the Tribunal may determine.

The difficulties that I see with these proposals are:
1. The lease that is said to remain “in full force and effect” is the Lease

2. I am invited to order that Rose enter into a new lease with Laundy Investments in circumstances where Laundy Investments has entered into occupation without the consent of Rose and where it is plain that Rose does not want Laundy Investments occupying his premises. I do not understand that this Tribunal has that power – a Court cannot force a lessor to enter into a lease with a party with whom the lessor is not in a contractual relationship (except pursuant to statutory requirement and only in very restricted circumstances)

3. What I am being invited to do is effectively create orders that would operate to effect a transfer of lease to, or create a new lease in favour of, an entity in occupation against the wishes of the lessor

4. I do not understand that I could grant relief against forfeiture at the suit of an applicant other than the lessee (suggested order 4)

5. Suggested order 4 is contrary to the submission that all that has occurred is a transfer of shares in the lessee. In addition, suggested order 4 is an acceptance that Laundy Investments is in occupation of the demised premises and wants that situation regularised.

52 Lastly, clause 12.2.3 (quoted above) also seems to apply and so also clause 12.2.4; the latter for the simple reason that the Amended Application now before this Tribunal, paragraph 2, is in my view sufficient notice under this clause. There is no need for me to travel further down this path because of the findings that I have made above and the view that I have expressed to the effect that there are substantial breaches of the Lease, that there was served a valid Section 129 Notice, that neither Batson Holdings nor Laundy Investments have complied with that Section 129 Notice and that, where the onus is clearly upon the person seeking relief against forfeiture, I should not exercise my discretion in all the circumstances and grant such relief.

53 By way of one final observation: in their supplementary written submissions 19 November 2004 on the question of costs (an issue on which I do not propose at this stage to determine) the respondents submitted that “any attempt by… Rose to rely on his strict legal entitlements (whatever they may be) should be regarded as unconscionable conduct…”. No case alleging unconscionable conduct was before me and the Tribunal was not constituted to hear such a claim.

Orders:

54 In these circumstances I make the following declarations and orders.

1. A Declaration pursuant to Retail Leases Act 1994 Section 72(1)(f)(iii) that the Applicant is entitled to terminate Lease registered 0542508 between the Applicant as Lessor and the First Respondent as Lessee in respect of the premises at Ground Floor, 724 Darling Street Rozelle, being Lot 2 in Strata Plan 69876, forthwith

2. Order that the Second Respondent forthwith give up vacant possession of the premises to the Applicant

3. I stand over for further consideration the relief sought in the Amended Application 035020 paragraphs 3 and 4

4. Liberty is granted to either party to apply generally and to restore these proceedings and matters numbered 25027 and 35144 to the list before me (subject to availability) by application to the Registrar and on 7 days notice

5. Costs reserved.

55 I am acutely aware that the result of the findings and orders above will no doubt involve these parties in further proceedings, not only in this Tribunal but also more than likely in the Supreme Court and clearly in the Licensing Court. However, there is nothing that I can do to alleviate that situation, it being caused peculiarly by the actions of Batson Holdings and Laundy Investments.