Taluja v Australian International Academy of Education Ltd

[2011] NSWCA 416

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Taluja v Australian International Academy of Education Ltd [2011] NSWCA 416

Hearing dates:

22/11/2011

Decision date:

21 December 2011

Before:

Beazley JA at [1]; Macfarlan JA at [2]; Young JA at [3]

Decision:

Appeal dismissed with costs.

Cross-appeal dismissed without costs.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords:

LEASES - lease of part of lot - part not specified - no plan attached - whether void for uncertainty - whether lease sufficiently identified demised premises

LEASES - subdivision - Environmental Protection and Assessment Act 1985 s 76A - whether agreement for lease effected an illegal subdivision - exclusions from agreement were buildings or parts of a building - agreement for lease did not effect a subdivision

LEASES - abandonment - agreement for lease assigned by second respondent to first respondent - whether constituted an abandonment - abandonment usually requires both factum and animus - at no stage did the respondents wish to abandon the lease - lease not abandoned

Legislation Cited:

Conveyancing Act 1919 ss 23D, 23F, 127, 129
Environmental Protection and Assessment Act 1985 ss 4, 4B, 76A
Local Government Act 1919 s 4
Real Property Act 1900 s 53

Cases Cited:

Australian National Carparks Pty Ltd v State Rail Authority of NSW [2005] NSWSC 120
Butts v O'Dwyer [1952] HCA 74; 87 CLR 267
Carberry v Gardiner (1936) 36 SR (NSW) 559
Davis v McConachie (1915) 15 SR (NSW) 510
Equuscorp Pty Ltd v HGT Investments Pty Ltd [2004] HCA 55; 218 CLR 471
Finlay Stonemasonry Pty Ltd v JD & Sons Nominees Pty Ltd [2011] NTSC 37; 249 FLR 462
Hardy v Wardy [2001] NSWSC 180; 10 BPR 18,577
Kemp v Lumeah Investements Pty Ltd (1983) 3 BPR 9203
Lam Kee Ying Sdn Bhd v Lam Sches Tong [1975] AC 247
Master Education Services Pty Ltd v Ketchell [2008] HCA 38; 236 CLR 101
Re Lehrer (1961) 61 SR (NSW) 365
Scott v Commissioner of Taxation (No 2) (1966) 40 ALJR 265
Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd [1978] HCA 42; 139 CLR 410
Young v Gosford City Council (2001) 120 LGERA 243

Category:

Principal judgment

Parties:

Dr Nirmal Taluja (Appellant)
Australian International Academy of Education Ltd (First Respondent)
Noor Al Houda Islamic College Pty Ltd (Second Respondent)
Silma Ihram (Third Respondent)

Representation:

D K L Raphael and T Flaherty (Appellant)
D Murr SC and J Doyle (First Respondent)
Second Respondent - Submitting Appearance
Penhall & Co Lawyers (Appellant)
Hunt & Hunt (First Respondent)

File Number(s):

CA 2010/298143

 Decision under appeal 

Citation:

Australian International Academy of Education Limited v Dr Nirmal Taluja & Ors [2011] NSWSC 648;
Australian International Academy of Education Limited v Dr Nirmal Taluja & Ors (No 2) [2011] NSWSC 880

Before:

Ball J

File Number(s):

SC 2010/298143

Judgment

1. BEAZLEY JA: I agree with Young JA.

1. MACFARLAN JA: I agree with Young JA.

1. YOUNG JA: This is an appeal from a decision of Ball J who made an order for specific performance of an agreement for lease made on 15 July 2003.

1. I should first set out the basic background facts, most of which are uncontested. The appellant is the registered proprietor of land at Strathfield which apparently was once used by the Methodist Church as a bible college when it was called Leigh College. The land consists of two lots, Lot 100/774567 which includes two principal buildings known as Leigh Hall and Vickery Chapel and Lot 4/773523 on which is erected another building known as Brundah Hall.

1. Brundah Hall is a double storey 9 room colonial style building with an attached single storey building known as the Annex and one detached single storey building known as the Summer House.

1. From the time that the appellant purchased the property, she, together with her husband and two children, resided in Brundah Hall, principally on the second level. In addition, she used rooms 15, 16 and 17 of Leigh Hall as a medical centre. Those rooms had a separate entrance and could be shut off from the rest of the building.

1. Since about 1999, Vickery Chapel has been used by Shree Shirdi Sai Sanstan Sydney Ltd as a place for prayer and community activities for the Sydney Hindu community. Without disrespect I will refer to this group as "the Hindu community".

1. The Hindu community has never taken an active role in these proceedings and the Court has been told that amicable arrangements have been made between it and the other parties for the continued use of Vickery Chapel.

1. Prior to January 2003, Noor Al Houda Islamic College Pty Ltd ("the Noor Al Houda proprietary company") (the second respondent), operated an Islamic school at Condell Park. The school needed new premises. The school's principal was Mrs Silma Ihram. Her husband approached the appellant about obtaining accommodation at the Strathfield premises.

1. In due course and on 18 March 2003, an agreement for lease was entered into between the relevant parties for a lease for 25 years commencing on 15 July 2003 with one five year option at a rent of $20,000 per month. I will need to deal with this document in more detail later.

1. The school moved into the property and has spent some $300,000 on renovations. In these reasons I will use the word "school" to cover the operator of the school for the time being. It would appear that its operators have continually paid rent from the commencement of the lease to the present time.

1. Disputes arose between the parties and the appellant proffered the view that the grant of the lease was illegal and void because there was an illegal subdivision brought about by the grant of the lease and that, in any event, the so-called lease was void for uncertainty or the lessee had abandoned it. There were other grounds of objection to which I will come shortly.

1. On 22 October 2010, the first respondent commenced proceedings by statement of claim in the Equity Division of this Court for specific performance of the agreement for lease. The matter was heard by Ball J on 20 to 23 June 2011, and his Honour gave a decision on 6 July 20011 [2011] NSWSC 647, granting the plaintiff conditional relief.

1. The appellant appeals against that decision. She names as respondents to the appeal the corporation which is currently carrying on the school (the Australian International Academy of Education Pty Ltd ("AIAE")), the Noor Al Houda proprietary company and Mrs Silma Ihram. Mrs Silma Ihram appeared both as a director of the second respondent and on her own behalf, but she protested that she should not be here on her own behalf because she was never a party to the proceedings. The Court agreed with this and ordered that the appeal against her be dismissed with costs. It then proceeded against the other two respondents.

1. The appeal was heard on 22 November 2011, Mr D K Raphael and Mr T Flaherty of counsel appearing for the appellant, Mr D Murr SC and Mr J Doyle of counsel appearing for the first respondent. Mrs Ihram, a director of the second respondent, appeared for it: she filed a submitting appearance but remained at the bar table during the hearing though she made no submissions.

1. Eight issues appear to be raised for determination, though some were not pressed as strongly as others. These are:

1. Is the grant of the lease illegal and void because of ss 4B and 76A of the Environmental Protection and Assessment Act 1985 (the "EP&A Act") or s 23D or s 23F of the Conveyancing Act 1919?

2. Is the agreement for lease void for uncertainty?

3. Has the lessee abandoned the lease, vide clause 17.1.5 of the agreement?

4. Was the lessee in breach by:

(a) ceasing to carry on business;

(b) assigning the lease; or

(c) otherwise

and has the lessor put an end to the lease?

5. Was the assignment of the lease to AIAE a sham?

6. Should the lease be rectified?

7. What is the significance of the lessor continuing to accept rent?

8. (Raised on the cross-appeal) Is there an operative estoppel against the appellant?

1. I will deal with the matters raised under those eight headings and then:

9. The result of the appeal.

1. 1. Before dealing with the actual questions that arise I need to describe the background facts and refer to various portions of the document. The document appears with slightly differing text in various places in the Blue Appeal Book. I am using the version on pp 443-471 which appears to be the document that was duly stamped.

1. It would appear that the document was in the form of a Real Property Act memo for lease with an annexure containing all the relevant terms and conditions. However, the actual form of memo for lease containing the first two pages has been lost, the parties being of the view that it was lost somewhere with the Commonwealth Bank. However, this is of no moment. The document that calls for vital consideration is the annexure which is headed "Commercial Lease".

1. It contains a reference schedule. Item 1 is " THE LAND" -

"Part of the land comprised in Folio Identifier 100/774567 together with part of the land comprised in Folio Identifier 4/773523."

1. Item 5 headed " DESCRIPTION OF PREMISES " sets out the street address and then contains these words "Including All existing buildings, (excluding the chapel) and the land."

1. Clause 2 is headed "Definitions and Interpretations". A lot of these are rather circular. However, there is a definition of "common area" and it is said that the term "means all those parts of the land contained in Folio Identifier 100/774567 ("the land") not demised or licensed to any person, designated by the Lessor from time to time for use by the tenants and other occupiers of the land and their respective employees invitees and licensees in common with each other." It is to be noted that there is no reference to Folio Identifier 4/773523. Nor is there any plan.

1. At this point it might be useful to describe the land. Lot 100 is far more extensive than Lot 4. Lot 100 has a frontage to Liverpool Road but its internal drive entry is from Hill Street. To the left hand side of the drive as one comes in off Hill Street is a car park, then as one proceeds along the road to the left is Leigh College and further on the Chapel. To the right appears to be an open area. Then as one proceeds up the drive one crosses into Lot 4 where there is Brundah Hall to the left and again the open area to the right and the drive seems to exit onto Liverpool Road. A plan prepared later appears to show that the appellant considers that the drive and the land to the right of the drive were the common usage land. The Chapel was not actually leased as at March 2003, but the Hindu community did at least have a licence over it.

1. Item 9 of the reference schedule headed " PERMITTED USE " said: "As a School and Educational Premises including child care facilities, kindergarten to Year 12 and Senior College activities."

1. Clause 16 dealt with assignments, sub-leases and mortgages. 16.1 generally requires the lessee to have the lessor's consent to any proposed sub-lease, but 16.1.A is as follows:

The Lessee shall be entitled to Sublease the Leased premises without consent if the proposed Sublease relates to the permitted use.

1. Clause 16.2 makes similar provisions with respect to assignments. 16.2.A reads:

The Lessee shall be entitled to Assign this Lease to relate [sic] parties without consent.

1. Clause 16.3 deals with the procedure for obtaining consent and 16.3.4 provides that, provided the lessee has complied with the procedure, if the lessor has not within 30 days after the request was made given notice in writing either consenting or withholding consent, the lessor is taken to have consented to the assignment.

1. Clause 16.7.1 is in a rather convoluted form, but seems to equate "related person" to the definitions as they appeared in the Corporations Law (being the statute governing corporations in force at the time). These are substantially the same as those in the present Corporations Act 2001 (Cth).

1. Clause 17.1.5 made it an act of default if "the Lessee ceases or threatens to cease to carry on its business or does not carry on its business in accordance with the Permitted Use". 17.2 permits that the lessor, "after first giving prior notice where required by law", at its option may by notice in writing determine the lease. The landlord purported to do that in February 2006, but continued to accept rent.

1. Clause 17.4 provides that the lessor's failure to take advantage of breaches shall not be construed as waiver. In particular, cl 17.4.3 provides:

The subsequent acceptance of rent under this Lease by the Lessor shall not be deemed to be a waiver of any preceding breach by the Lessee of any term, covenant or condition of this Lease other than the failure of the Lessee to make the particular payment or payments of rental so accepted, regardless of the Lessor's knowledge of such preceding breach at the time of acceptance of such rent.

1. Clause 24.9 provides:

The Lessor shall have full and free use of the Chapel and common land areas however the Lessee shall not be required to maintain and repair the Chapel.

1. Clause 24.12 provides:

This Lease shall operate and act as a Deed and be deemed an Agreement for Lease pending the commencement of this Lease.

1. Clause 24.15 provides:

Notwithstanding the provisions of the Lease, the parties agree that the Lessor shall be entitled exclusive access and use of the Doctors Surgery within Leigh Hall College comprising Rooms 15, 16 and 17 and the toilet facilities.

1. I should also note that clause 2.7 of the lease was an entire agreement clause, that is, making it clear that the lease covered the whole agreement between the parties and that there were no other terms nor should any be implied.

1. Later in 2003, Noor Al Houda proprietary company became insolvent and was placed into administration on 18 July 2003. The company entered into a deed of company arrangement on 8 September 2003.

1. In about August 2004, Mrs Ihram and a Mr Adada formed a new company, a public company limited by guarantee, named Noor Al Houda Islamic College (Holdings) Ltd ("Holdings"). The operation of the school was gradually taken over by Holdings, but the rent was still being paid by Noor Al Houda proprietary company.

1. By June 2006, Holdings' financial position had become desperate. The trustees of the Islamic Trust Foundation of Victoria agreed to help out, they became the directors of Holdings which later changed its name to AIAE.

1. The primary judge held at [43] that Mrs Ihram continued as principal for a while after the replacement of the directors, but she left at the end of 2006, though she continued on as a consultant. The primary judge found that the appellant was aware of these changes having been informed in June or July 2006 of it by someone who introduced herself as the new principal.

1. In February 2007, AIAE agreed to take an assignment of Noor Al Houda proprietary company's rights under the lease. The school's solicitors wrote to the appellant seeking her written consent. She did not respond. However, she did telephone the solicitors maintaining that the Noor Al Houda proprietary company was in breach of the lease.

1. From at least April 2007, the appellant sent the school various letters alleging default under the lease and threatening termination.

1. On 20 June 2007, the appellant sent a further notice to the Noor Al Houda proprietary company purporting to terminate the lease. She relied on nine alleged breaches.

1. I now return to consideration of the question as to whether the grant of the lease was illegal or void because of provisions of the EP&A Act or the Conveyancing Act.

1. Section 76A(1) of the EP&A Act provides:

If an environmental planning instrument provides that specified development may not be carried out except with development consent, a person must not carry the development out on land to which the provision applies unless:

(a) such a consent has been obtained and is in force, and

(b) the development is carried out in accordance with the consent in the instrument.

1. The EP&A Act provides in s 4 that development includes subdivision of land. Section 4B(1) defines subdivision of land as:

The division of land into two or more parts that, after the division, would be obviously adapted for separate occupation, use or disposition. The division may (but need not) be effected:

(a) by conveyance, transfer or partition;

(b) by any agreement, dealing, plan or instrument rendering different parts of the land available for separate occupation, use or disposition.

1. Section 4B(3) of the EP&A Act provides:

(3) However, subdivision of land does not include:

(a) a lease (of any duration) of a building or part of a building ...

1. The definition is different to that which prevailed for many years as s 4 of the Local Government Act 1919 where similar words were used for subdivision, but the equivalent of s 4B(1)(b) was "by any agreement dealing or instrument inter vivos (other than a lease for a period not exceeding 5 years)." Under the definition section "lease" included agreement for lease. Accordingly, under the old system, one could differentiate between an interest created by a lease for five years or more and one for less than that period.

1. Despite the wide words in the definition, not every agreement which permits separate use of land will amount to a subdivision; see eg Young v Gosford City Council (2001) 120 LGERA 243, 255 [30].

1. Just what temporary use or occupation of land (other than buildings which are specifically dealt with in the legislation) would constitute a subdivision is a question of fact which does not arise. One would have thought that if there was a papal visit and a school allowed a Catholic corporation to use its oval for the erection of temporary buildings for the refreshment and relief of people attending a papal function for a couple of weeks, that that would not be a subdivision even though there would be separate occupation.

1. The new definition does not distinguish between a lease for one day and a lease for five years or more. It is thus not vitally necessary to analyse the rights that were created by the agreement for lease.

1. Because of s 53 of the Real Property Act 1900 and decisions such as Carberry v Gardiner (1936) 36 SR (NSW) 559, 569, no common law term exceeding three years in Torrens System land can be created without a registered instrument. It is arguable that there was a 25 year lease created in equity, but there are difficulties in this argument because, if there was a subdivision involved and the local council has not consented to it, then the lease agreement may not be specifically enforceable, in which case there would not be an equitable lease. As the primary judge found specific performance subject to the condition that council approval be obtained, if that decision stands, one may very well conclude that there was an equitable lease for 25 years.

1. At law, there will be created a tenancy which is governed by s 127 of the Conveyancing Act ( Carberry at 569). This is a tenancy at will determinable on a month's notice, but is subject to such of the terms of the agreement as are not inconsistent with such a tenancy; see eg Kemp v Lumeah Investments Pty Ltd (1983) 3 BPR 9203.

1. Under s 4B(1)(b), one focuses not on the lease, but on the agreement. The agreement provides for separate occupation for 25 years and so would prima facie be a subdivision.

1. However, as I have noted above, there is no subdivision where there is a lease of any duration of a building or part of a building. Probably lease includes lease in equity. If there had been a lease to the Hindu community of the Chapel and if there had been a separate lease back from the first respondent to the appellant of the part of Brundah Hall that she occupied at the relevant time, and subject to that the whole of the two lots were leased to the first respondent, there would be no question of a subdivision. Does it matter that the transaction was not carried out in this way?

1. Before answering that question, two other matters must be dealt with.

1. The first of these is clause 24.12 of the lease document which says:

This Lease shall operate and act as a Deed and be deemed an Agreement for Lease pending the commencement of this Lease.

1. In view of Carberry's case, this cannot operate to make the lease a lease at law. However, it may well be that the clause operates to reverse the effect of cases such as Davis v McConachie (1915) 15 SR (NSW) 510, but until the lease becomes a lease at law by registration, the covenants are not enforceable as covenants. Apart from this it is hard to see how the clause can have any effect.

1. The second matter is of construing what the lease actually demises.

1. I have already set out part of the reference schedule and it can be seen that the definition of "the land" indicates that the lease is over part of the land in two certificates of title, though does not designate which part. However, the description of premises in item 5 gives the street address of the property and says "including all existing buildings (excluding the Chapel) and the land". This still contains ambiguity.

1. In the definitions in clause 2.1 there is a definition of "Common Area" which is said to mean "all those parts of the land contained in Folio Identifier 100.... ('the land') not demised or licensed to any person, designated by the Lessor from time to time for use by the tenants and other occupiers of the land and their respective employees invitees and licensees in common with each other." In the same clause there is a definition of "premises" which is said to mean "that part of the Land hereby demised in item 5 and includes the Lessor's fixtures and fittings".

1. There is no plan attached to the lease. However, there is a plan in evidence which I have described earlier and this shows that there is vacant land adjoining the internal road on the Liverpool Road side of the plot. The lease as I have indicated, does mention common land. There are three possibilities: (a) that the references to common land in the lease are mere excrescences where the drafter has not crossed out provisions of a common form; (b) that the common area can be identified by extrinsic evidence; or (c) the lease is void for uncertainty.

1. The further amended statement of claim contains as annexure A a plan of the land which shows a landscaped area adjoining Liverpool Road and then further away from Liverpool Road a lawn area, but the further amended statement of claim seeks a declaration that there is a valid and enforceable lease in respect of the whole of the land excluding the Vickery Chapel.

1. The primary judge said at [61]:

It is clear that the lease describes the leased land as "part" of the two lots because of the exclusion of the Chapel and Rooms 15, 16 and 17 and the toilet facilities of Leigh Hall. Those exclusions are capable of precise identification. Consequently, the lease is not void for uncertainty. The fact that no plan was attached does not alter the position.

1. The primary judge's judgment does not seem to be troubled with the question as to what was the common area excluded from the lease of part of Lot 100. Mr Raphael's submissions put that there are a number of possibilities, viz: (1) the common driveway over Lot 100 (but for some reason or other not Lot 4); (2) common use of the car park; (3) common use of the grassed gardens in front of Lot 100 (but not Lot 4); and three other possibilities.

1. Mr Murr says that the form of the lease obviously shows that it is a shopping centre lease precedent which has been adapted. There are various parts of the lease which are just inapplicable. With a shopping centre lease one finds references to common area, but it is quite inappropriate to the present case, and that when one looks at the lease as a whole, one just gives no significance to the references to the common area or common land area.

1. I have a reluctance to take that course because, as a general rule, it is necessary to give every word in the document some significance if possible because one does not lightly assume that parties have gone through the solemn farce of putting in meaningless references to documents. However, in the instant case, Mr Murr's explanation has a fair amount of good sense behind it and the other possible constructions have less to recommend them than this one.

1. The second possibility is that one can use the surrounding circumstances to make more certain what is indefinite in the lease; see eg Foa , General Law of Landlord and Tenant (1947) [96] p 57. Mr Raphael says that one cannot do that in the instant case because of clause 2.7 of the lease, the entire agreement clause.

1. I do not consider that that clause operates so that one cannot look to surrounding circumstances and to the state of the land when the lease was granted to construe what was demised.

1. A more serious objection is that there is not just any sufficient evidence as to what the parties did mean other than that they meant the whole of the land other than the two areas which were to be occupied by the appellant as her doctor's surgery and by the Hindu community.

1. Mr Raphael says that to construe the lease that way really means reading out the word "part" or substituting the word "whole". I do not, with respect, agree with that. It is still part, even if part means virtually the whole. The principal reason for not adopting this construction is the reference to the common areas which I have already considered.

1. The third possibility is that the lease is void for uncertainty. This is something that the Court would strive to avoid, particularly in a case where the tenant has been in active possession for a number of years and has paid rent. However, as Mr Raphael points out, there are limits on a court construing a document to avoid reaching the conclusion that it is void for uncertainty. Mr Raphael submits that that point has been reached. With respect, I disagree. It seems to me that one can dispose of the problems with the common areas in the way in which I have noted above and that the factual matrix, married with some provisions in the lease document, shows that the part referred to is the whole of the land other than the Chapel and the doctor's three rooms in Leigh Hall.

1. Returning then to the question as to whether there is a subdivision, if the lease were a lease of the whole excepting Vickery Chapel and the doctor's rooms in Leigh Hall, there would be no doubt at all that there was no subdivision involved because of the proviso to the definition of subdivision that a lease of any duration of a building or part of a building is not a subdivision.

1. In the Northern Territory, there is a similar provision save that the proviso applies only to part of a building, not to the lease of the whole building. The Northern Territory legislation was considered by Blokland J in Finlay Stonemasonry Pty Ltd v JD & Sons Nominees Pty Ltd [2011] NTSC 37; 249 FLR 462. In that case there was a lease for part of a building for the purpose of operating a coffee shop, but the lease described what was demised to "all the land, building and improvements indicated in the diagram". The argument was that because of the maxim cuius est solum eius usque ad coleum et ad infernos, not only was part of the building leased but also the land underneath it and the airspace above it and thus there was an illegal subdivision. Her Honour rejected that argument, ruled that the cuius est solum maxim must be applied sensibly, construed the exception pragmatically and held there was no subdivision.

1. In Hardy v Wardy [2001] NSWSC 180; 10 BPR 18,577, the plaintiff was a lessee of a warehouse at Alexandria for seven years with an option to purchase. The lease described what was demised as "two storey building being warehouse and offices known as ... Alexandria". Bryson J held that on the factual matrix of that case, the parties had intended to create a lease over the whole of the land on which the building stood as well as the building itself and hence there was a subdivision. However, he still made an order for specific performance, holding that a mere agreement was not sufficient to involve an illegality but that the decree would need to be moulded so that the law was complied with.

1. The decision is the subject of a note by Professor Peter Butt in (2002) 76 ALJ 346-7. Professor Butt notes that Bryson J's decision was contrary to the practice in NSW which had commenced with the decision of Jacobs J in Re Lehrer (1961) 61 SR (NSW) 365 and that the redrafted proviso which now appears in the EP&A Act was designed to restore the pre Hardy v Wardy view of the law. With respect, I think that is right.

1. Accordingly, unless the circumstances otherwise show, the lease of a building does not imply the lease of the land below or above the building. It does not effect an illegal subdivision because of the proviso in s 4B(3)(a) of the EP&A Act.

1. The present case, of course, involves not the lease of a building but just the mirror reverse: the lease of the whole of the land except two buildings or two buildings and part of another building. In my view, that lease should be treated in the same way, that is, that as the lease of the building or part of a building would not be an illegal subdivision, so also is the lease of what is left after those two buildings or portions of a building are excised. Thus in my view there is no subdivision involved in the instant case.

1. However, if I am wrong in this, then I am quite sure that the way in which the learned primary judge dealt with the matter is correct. As in Hardy v Wardy , a decree was made requiring the appropriate subdivisional approval to be obtained before there was a change in registered title.

1. The learned primary judge dealt with this problem in paras [66] and following of his reasons. He noted that the EP&A Act does not expressly address the enforceability of agreements that involve a breach of the Act. He noted that the trend of authority such as Australian National Carparks Pty Ltd v State Rail Authority of NSW [2005] NSWSC 120, was to the effect that dealings involving a breach of s 76A(1) of the EP&A Act are not automatically void.

1. This view depends to a large extent on the way the High Court has approached questions of agreements that breach an Act in Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd [1978] HCA 42; 139 CLR 410 at 423; Master Education Services Pty Limited v Ketchell [2008] HCA 38; 236 CLR 101.

1. The primary judge said at [72]:

Once it is accepted that the lease is not void because it involves a breach of s 76A(1) of the EPA Act, in my opinion a term is to be implied that Dr Taluja will do all things reasonable on her part to be done to have the lease registered, including obtaining the council's consent to the subdivision effected by the lease. That implied obligation arises from the fact that Dr Taluja agreed to grant a lease of the premises the subject of the lease to Noor Al Houda for 25 years. That lease can only take effect if the lease is registered. In order to register the lease, the land to which the transaction relates must be shown on the current plan. Relevantly, the current plan must be a registered plan which is a plan of subdivision. However, a plan of subdivision cannot be registered unless the subdivision has been approved. The agreement to grant the lease carries with it an agreement to do all things reasonable to give effect to that agreement*... .

[*The learned judge referred to Butts v O'Dwyer [1952] HCA 74; 87 CLR 267]

1. I respectfully agree.

1. Accordingly, I consider that the ground that the grant of the lease was illegal and void because of ss 4B and 76A of the EP&A Act fails.

1. Section 23F of the Conveyancing Act 1919 allows the Registrar General to refuse to register transactions of part of an existing lot unless there is a current plan. For this reason, the lease is not in registrable form.

1. Although Mr Raphael put some reliance on this section, it really has little significance. The appellant covenanted to do all that was necessary to secure registration and the supply of a plan falls within this covenant.

1. Section 23D of the Conveyancing Act which requires writing does not cause a problem as there is sufficient writing or, even if that is wrong, there has been part performance.

1. 2. I have already in my discussion of 1, given reasons as to why the lease should not be considered to be void for uncertainty.

1. 3. I have already noted that clause 17.1.5 provides that it is an event of default if the lessee ceases or threatens to cease to carry on its business or does not carry on its business in accordance with the permitted use.

1. As I have noted, the original lessee was placed in administration on 18 July 2003 and the successor became financially embarrassed in June 2006, both occasions resulting in the lease being, to use a neutral term, passed along the line.

1. The primary judge at [51] notes that Mr Raphael submitted that the Noor Al Houda proprietary company abandoned its rights arising from the lease by transferring the operations of the school to Holdings. The judge notes that he relied on the decision of the Privy Council in Lam Kee Ying Sdn Bhd v Lam Sches Tong [1975] AC 247. At [52] the primary judge said:

In my opinion these submissions are misconceived. I do not see how an intention on the part of Noor Al Houda to abandon the premises can be inferred from what happened.

He noted that the Noor Al Houda proprietary company in fact transferred its interest under the lease to Holdings rather than abandoning it, and that there was no intention at any stage to give up the right to the lease. He also noted that in the Lam Kee Ying case the question was whether there had been a parting with possession rather than abandonment and that the case was of no assistance at all.

1. I respectfully agree. In addition, it is noteworthy that in neither of the notices that the appellant sent to the school in 2007 was there any allegation of a ceasing of business or of an abandonment, though the notice of 20 June did note as a ground that the Noor Al Houda proprietary company had gone into administration. Furthermore, the landlord continued to accept rent in respect of the premises well after the transfers of 2005 and 2006.

1. This ground of appeal cannot succeed.

1. 4. The next attack was on the basis that the lessee was in breach of the lease. On appeal, this was narrowed to two grounds: (a) ceasing to carry on business; and (b) assigning the lease without consent, though the argument strays into other areas as well. However, there was no longer any claim for non payment of rent.

1. There is no way that this ground can succeed.

1. I have already dealt with most of the points that arise with regard to the alleged breach of ceasing to carry on business. The provisions of the lease have to be read together, and if there is a provision for assignment and parting with possession, then if that occurs, the provision about carrying on business by the original lessee is subsumed.

1. So far as assignment is concerned, clause 16.2.A provides that the lessee shall be entitled to assign the lease to relate [sic] parties without consent and clause 16.1.A provides it is entitled to sub-lease without consent if the proposed sub-lease relates to the permitted use. What occurred was an assignment rather than a sub-lease. Although "relate parties" was not defined, clause 16.7.1 provides that for the purposes of clause 16 references to related corporations are as defined by the Corporations Law (the law relating to corporations in force at the relevant time). It would seem that, at least at the time of the assignment, the successors to the original Noor Al Houda proprietary company were related parties within this definition.

1. Thirdly, there was almost certainly a waiver of the breach by the continued acceptance of rent and the recognition of the lease by the landlord by continuous demands on the lessee for the time being as to observing the lease.

1. Fourthly, no notice was given under s 129 of the Conveyancing Act specifying the breach and how it could be remedied. For all these briefly stated reasons, the ground cannot succeed.

1. 5. The next allegation is that the assignment of the lease was a sham.

1. Mr Raphael says that the assignment is best described as a sham because the assignment had in fact taken place in 2005, yet the formal assignment only took place in April 2007. Mr Raphael refers to the old taxation case of Scott v Commissioner of Taxation (No 2) (1966) 40 ALJR 265 at 279 where Windeyer J drew the distinction between a faade behind which activities might be carried on and the situation where parties meant a document to be their real transaction. There have been many cases on sham since which say much the same thing: see Equuscorp Pty Ltd v HGT [2004] HCA 55; 218 CLR 471. In the present case there is no doubt at all in my mind that the parties in the interests of the school always intended that the lease would be transferred to another corporation associated with the original lessee. It is not unknown for a formal assignment to take place some time after parties have agreed on it. There is just no material to suggest that the assignment was a sham within the meaning of that word in the authorities.

1. Furthermore, it must be said that "abandonment" is a very odd concept in law. There are situations where an easement might be abandoned and perhaps personal property may be abandoned. However, usually abandonment in contract law means that both parties have impliedly agreed that the contract is at an end.

1. Whatever abandonment means in the case of a lease, it does not mean that one party can put an end to a lease by just walking away from it.

1. On the facts of this case, at no stage did the school interests wish to abandon the lease. They had a thriving school on the land and wished to continue. Abandonment usually requires both factum and animus and to my mind, neither is present in the instant case.

1. I now turn to the more detailed submissions made under this head.

1. The primary judge at [73] noted that three reasons were put to him why the assignment to the present first respondent was not effective. The first was that the landlord had not consented to the assignment. The second was that only the administration had power to execute an assignment of lease, the mere fact that he had consented was not sufficient, and the third was that the first respondent does not come to equity with clean hands.

1. The primary judge rejected all three of these submissions. The first because the lessor was deemed to have given her consent if she did not respond to the request for consent within 30 days. (Another reason would be clause 16.2.A to which I have recently referred). The second because there was no reason given why the board of the Noor Al Houda proprietary company did not have authority to execute the assignment, and thirdly, because there was just no evidence before the judge that there was any uncleanness of hands on the part of the first respondent. I respectfully agree.

1. The case on the assignment being a sham, or the lease being abandoned, is not made out.

1. 6. The respondents point out that the notice of appeal does not actually seek any order for rectification. The submissions actually made in the notice of appeal are that there was a mistake made by the lawyer who put the agreement or lease together in omitting to include a provision for an increased rent which had come about as the result of what might be called a side deal negotiated between the parties.

1. The primary judge found that there was no such side deal and accordingly he did not need to pursue the claim for rectification.

1. I can see no error in the finding of facts made by the primary judge nor his conclusion.

1. 7. I have already dealt with the question of accepting rent after knowledge of a possible breach.

1. It is trite law that when a tenant commits a breach of covenant, he or she or it commits a forfeiture in the technical sense, ie, that the lease is liable to be forfeited. The landlord then has the election as to whether it will enforce the forfeiture or waive it. The authorities are clear that if, with knowledge of the alleged breach, the landlord continues to accept rent, the conclusion almost always is that the forfeiture has been waived.

1. I quoted earlier the provisions of cl 17.4. I am not too sure of the effect of that clause. However where, as in the instant case, the landlord not only accepts rent for many years, but also repeatedly insists that alleged breaches be remedied, I do not consider that cl 17.4 operates to avoid the usual consequences of such conduct under the general law.

1. 8. The notice of cross-appeal contends that, if the Court of Appeal finds that the execution of the memorandum of lease did not give rise to an agreement for lease described in order 1 of the primary judge's judgment, then, either: (1) the appellant is estopped from denying that there is an agreement to lease as described; or (2) an agreement on identical terms has arisen by payment of rent and occupation of the premises on the express terms of the memorandum of lease.

1. It is unnecessary to deal with this matter and indeed it was only very sparsely argued on the appeal. Mr Raphael says this is not a case for estoppel because he alleges that the fact that the first respondent had become the lessee was concealed from the appellant, it was a dishonest and clandestine act. It follows that the appellant could call in aid the clean hands doctrine. In any event he submits that if the lease is to be in the same terms as the memorandum of lease, it would be void for uncertainty or illegality in the same way as the original document.

1. It seems to me that there are good reasons for saying that there is an estoppel here because of the conduct of the parties over the period since the school interests took possession of the land. Further, none of the defences that I have just summarised have been found not to be valid in respect of the appeal and they have no more validity with respect to the cross-appeal.

1. 9. Accordingly, in my view the appeal should be dismissed with costs. The cross-appeal should also be dismissed but without costs as it is purely defensive.

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Decision last updated: 21 December 2011