Tannous v Cipolla Bros Holdings Pty Ltd

[2001] NSWSC 236

Reported Decision: (2002) NSW ConvR 56-001

New South Wales

Supreme Court

CITATION:	Tannous v Cipolla [2001] NSWSC 236
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 1398/01
HEARING DATE(S):	29/03/01, 30/03/01
JUDGMENT DATE:	6 April 2001
PARTIES :	Bernard Tannous - Plaintiff Cipolla Bros Holdings Pty Limited - Defendant
JUDGMENT OF:	Barrett J

COUNSEL :	Mr M.W. Hadley - Plaintiff Mr N. Potts - Defendant
SOLICITORS:	Jones King Lawyers - Plaintiff Star Carver & Co - Defendant
CATCHWORDS:	Lease - termination for non-payment of rent - whether personal cheque constitutes payment - relief against forfeiture - relevance of tenant's conduct in other premises leased from landlord in same building - disentitling factors discussed - whether cleaning of premises is "use" of premises - relief against forfeiture granted
LEGISLATION CITED:	Conveyancing Act 1919
CASES CITED:	George v Cluning (1979) 28 ALR 57 Re Parker (deceased) (1985) 79 FLR 338 Josland v Mullaly Properties Pty Ltd (1993) 6 BPR 13285 Deputy Commissioner of Taxation v Barroleg Pty Ltd (1997) 25 ACSR 167 Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW Ltd (1970) 2 BPR 9562 Chandless-Chandless v Nicholson [1942] 2 KB 231 Legione v Hateley (1983) 152 CLR 406 Leads Plus Pty Ltd v Kowho International Pty Ltd (2000) 10 BPR 18085 Jam Factory Pty Ltd v Sunny Paradise Pty Ltd [1989] VR 584 Direct Food Supplies (Vic) Pty Ltd v DLV Pty Ltd [1975] VR 358 Courtney Creche Pty Ltd v Okko's Fine Art and Custom Framing Pty Ltd (Young J - unreported - 22 June 1995)
DECISION:	Termination of shop lease valid. Relief against forfeiture granted. Consent to assignment of shop lease not unreasonably withheld. Lease of reception lounge continues to be a valid and subsisting lease.

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

FRIDAY, 6 APRIL 2001

1398/2001 - TANNOUS v CIPOLLA BROS HOLDINGS PTY LIMITED

JUDGMENT

HIS HONOUR:

Background

1 The defendant has been, at all material times, the owner of a building situated at 95 Gibson Avenue, Padstow. The lower storey, at street level, consists of several lock-up shops. Above the shops, and with an entrance from the Gibson Avenue frontage by means of a staircase, are premises referred to throughout the hearing as “the reception lounge” which are fitted out and used for functions such as wedding receptions and parties. In May 2000, the plaintiff became the tenant of one of the shops at street level (shop 2, a take-away food shop) and the reception lounge. Each tenancy was created by a written lease. Both leases have been registered under the provisions of the Real Property Act 1900.

2    The proceedings are principally concerned with the lease of shop 2 and the question whether the defendant validly terminated that lease for non-payment of rent (in which event, the plaintiff claims relief against forfeiture). The reception lounge and its lease are relevant because the defendant, by its Cross-Summons, seeks certain orders in respect of them and because the plaintiff’s conduct in relation to the reception lounge may have a bearing upon his claim for relief against forfeiture of the shop lease should that arise for determination.

3    The lease of shop 2 created a term of five years commencing on 19 May 2000 at a rent of $7,800 per year payable by monthly instalments of $650 each, with payment in advance on the 19th of each month. It is common ground that, despite the written terms, the parties agreed that rent would commence on 25 May 2000 and that subsequent instalments would be payable on the 25th of each month. It is also common ground (although not apparently provided for in the lease) that the burden of goods and services tax in respect of the rent would be borne by the tenant as from 1 July 2000, so that the effective obligation of the tenant from that date became an obligation to pay $715 per month instead of $650 per month.

4    The lease of shop 2 also contained provisions requiring the lessee to pay a security bond (clause 10, item 11 Reference Schedule), to pay the lessor’s legal costs of and incidental to the preparation of the lease (clause 1.7(a)) and to effect certain insurances (item 6, Reference Schedule).

5    The lease of the reception lounge created a term of five years also commencing 19 May 2000. The dispute concerning that lease is confined to one principal matter, namely, whether the plaintiff has breached any provision of the lease by conduct which will be examined in due course and involved the cleaning of parts of the reception lounge by the use of a water hose. There is a subsidiary issue under that lease concerning the installation by the plaintiff of slate tiles around the doorway to the reception lounge staircase on the Gibson Avenue frontage and the installation of a new door.

6    The plaintiff has entered into a contract to sell the business conducted in shop 2. He has also sought the defendant’s consent to assignment of the shop lease to the purchasers under that contract. No such consent has been given.

The principal issue - was the shop lease validly terminated ?

7 Concentrating, for the moment, on the lease of shop 2, the principal dispute centres upon a purported termination of the lease by the defendant in consequence of a Notice of Termination dated 7 February 2001 given by the defendant to the plaintiff. It was submitted by Mr M.W. Hadley of Counsel for the plaintiff and conceded by Mr N. Potts of Counsel for the defendant that grounds of termination referred to in the Notice of Termination in addition to non-payment of rent could not be relied upon by the defendant as the notice did not satisfy the requirements of s.129(1) of and Schedule 6 to the Conveyancing Act 1919. Because of the saving or exception effected by s.129(8) in relation to non-payment of rent, the notice not satisfying those requirements could, however, be relied upon in the context of termination on that ground alone.

8    The case in support of the validity of the termination of the lease of shop 2 is thus based solely on the alleged non-payment of rent. The central issue is accordingly whether, at the time the Notice of Termination of the shop lease was given by the defendant’s solicitors to the plaintiff’s solicitors on 7 February 2001, any amount of rent which had become due was unpaid so that rent was in arrears.

9    Both parties led evidence about the history of rent payments. It is clear that the plaintiff was not systematic in the payment of rent. It is equally clear that the defendant adopted a somewhat laissez-faire attitude and was not insistent that rent be paid according to the strict letter of the lease.

10    In any event, the evidence shows that, disregarding dishonoured cheques, the plaintiff had, before 7 February 2001, delivered to the defendant cheques totalling $6,450 in respect of the rental obligation for shop 2 which, according to the lease provisions and supplementary arrangements already mentioned, amounted, at that point, to $6,349.52. The cheque which the plaintiff had given to the defendant most recently before 7 February 2001was a cheque for $4,552.53 which was enclosed with the plaintiff’s solicitors’ letter of 2 February 2001 delivered to the office of the defendant’s solicitors. That letter read in part as follows:

“In relation to your alleged arrears of rent for the Take-away shop, we enclose a cheque in the amount of $4,552.53 being payment of three months rent plus GST for the Take-away shop, and one months rent plus GST for the Reception Lounge.”

The reference to three months’ rent for the shop makes it plain that, of the total amount of $4,552.53 for which the cheque was drawn, the sum of $2,145 related to the rent reserved by the lease of shop 2, inclusive of the GST component (i.e., $715 x 3 = $2,145). However, by their letter of 7 February 2001 with which the Notice of Termination was enclosed, the defendant’s solicitors rejected the cheque for $4,552.53 and sent it back.

11    If the sum of $2,145 attributable to the shop rent and comprised in the cheque for $4,552.53 was, as a matter of law, paid by the plaintiff to the defendant by means of delivery of that cheque on 2 February 2001, the position when the Notice of Termination was given was that rent was not in arrears. If, on the other hand, the defendant properly rejected the cheque for $4,552.53, so that the sum of $2,145 was not, by means of that cheque, paid by way of rent under the shop lease, the plaintiff was in arrears at the time Notice of Termination was given. It therefore becomes necessary to decide whether, by delivering the cheque for $4,552.53 by means of his solicitors’ letter dated 2 February 2001, the plaintiff is to be regarded as having paid the relevant sum of $2,145 under the shop lease.

12    That issue turns to a large extent on the evidence concerning the course of dealings between the plaintiff and the defendant during their commercial relationship which had begun in May 2000 when the plaintiff took a lease of the two parts of the defendant’s premises at 95 Gibson Avenue already mentioned. So far as payments are concerned, the course of dealings involved rent on both the shop and the reception lounge, other payments under the leases (including bonds and legal costs) and payment for items sold by the defendant to the plaintiff. The evidence makes it clear that, with the exception of a bank cheque which changed hands at the inception, all payments made by the plaintiff to the defendant were by means of cheques drawn (sometimes by the plaintiff, sometimes by his father) on the joint account at the Commonwealth Bank of the defendant and his father styled “Soiree in Heaven”. There was thus a course of conduct from May 2000 to January 2001 in which it is fair to say that cheques drawn on this joint account were essentially the only medium of payment. Two of these cheques were dishonoured. Letters of 5 October 2000 and 19 December 2000 received by the defendant from its own bankers, Westpac Banking Corporation, establish that a cheque for $3,122.46 and a cheque for $1,430, both drawn on the joint account, were returned unpaid by the drawee bank with the answer “Refer to drawer”.

13    In a letter dated 30 January 2001 sent by the defendant’s solicitors to the plaintiff’s solicitors, the following passage appears:

“Please advise your client that all future rental payments are to be made by Bank Cheque, Cash or Money Order. No further cheques will be accepted.”

14    In a letter of the following day, 31 January 2001, addressed to Charly Tannous (the plaintiff’s brother, a solicitor with Jones King, the firm acting for the plaintiff), the defendant’s solicitors said:

“We are instructed to advise that all further payments of rent should be made by your father (as opposed to Bernard) as has been the case in the past, in any event, direct to Mr Pasquale Cipolla by Bank Cheque, cash or Money Order. No personal or Company cheque will be accepted.”

(The reference to “Bernard” is a reference to the plaintiff.)

15    It was put by Mr Hadley for the plaintiff that the defendant had, in reality, accepted the payment of $4,552.53 since, after being informed by the defendant’s solicitor of the arrival of the cheque for that amount with the plaintiff’s solicitors’ letter of 2 February 2001, Mr Pasquale Cipolla, the director of the defendant involved in dealings with the plaintiff, had written out a receipt and a tax invoice. This was done before the solicitor notified the plaintiff that the cheque was rejected. But the receipt Mr Cipolla prepared was never given to the plaintiff and I am satisfied that, in taking the action he took, Mr Cipolla was merely attending to internal administrative matters of a preparatory kind, not knowing that the cheque which had been delivered to his solicitor did not satisfy the payment requirements which had been imposed in the defendant’s solicitors’ letters of 30 and 31 January 2001 to the plaintiff’s solicitors. There was accordingly no acceptance by the defendant of the cheque for $4,552.52 and it is necessary to decide whether its delivery to the defendant’s solicitors on 2 February 2001 constituted payment of $2,145 rent for shop 2.

16 The question whether delivery of a personal cheque constitutes discharge of a money obligation was dealt with as follows by Mason J (with whom Aickin J agreed) in George v Cluning (1979) 28 ALR 57:

“The practice of giving and accepting personal cheques in payment of debts and liabilities is now so widespread that there is a general expectation on the part of persons making payments that a personal cheque, given in payment of a debt or liability, will be accepted unless the payee objects before or at the time of receipt that the cheque does not constitute legal tender. To my mind the law was correctly stated in two Canadian decisions - Wexelman v Dale (1917) 35 DLR 557 and Laidlaw v Rehill (1943) 4 DLR 429 - where it was decided that a personal cheque, though not legal tender, was a sufficient payment if not objected to on that account.”

Barwick CJ said:

“Further, the cheque itself, unless the agreement is read as demanding legal tender, is conditional payment. When honoured it is payment as from the date of receipt of the cheque.”

17 In Re Parker (deceased) (1985) 79 FLR 338, Nygh J professed himself “more than happy to follow the remarks of Mason J as indicating the law in Australia today”. In Josland v Mullaly Properties Pty Ltd (1993) 6 BPR 13285, Young J accepted that delivery of a personal cheque may well be a legally acceptable means of paying a deposit. The same Judge said in Deputy Commissioner of Taxation v Barroleg Pty Ltd (1997) 25 ACSR 167 at 172:

“The second matter is that although the company purportedly had [scil. paid] the full amount demanded, the payment was by cheque and not the company’s cheque. However, prima facie this would have been compliance with the demand. As the letter returning the cheque never took any point that the cheque was insufficient tender as a matter of law, any possible point as to the formality of the tender must be taken to be waived: see George v Cluning (1979) 28 ALR 57. Thus, had this matter been relevant, I would have held that there had been compliance with the statutory demand.”

18    Particularly in the light of the way in which the present parties had conducted themselves since the beginning of their relationship, tender of a cheque drawn on the joint account of the plaintiff and his father with the Commonwealth Bank must be taken to have constituted payment by the plaintiff at least until the defendant’s solicitors gave notice by their letters of 30 and 31 January 2001 that personal cheques would no longer be acceptable and that cash, bank cheque or money order would be required. But once those two letters were sent to the plaintiff’s solicitors, the position became one where, in the words of Mason J in George v Cluning, “the payee objects before or at the time of receipt that the cheque does not constitute legal tender”. I hold, therefore, that delivery of the cheque for $4,552.53 by the plaintiff to the defendant on 2 February 2001 did not technically constitute payment of $2,145 rent under the lease of shop 2. This is because the objections to that manner of payment in the defendant’s solicitors’ letters of 30 and 31 January 2001 caused what may be termed the general presumption favouring payment by cheque to be displaced. It follows that rent was in arrears when the Notice of Termination was given on 7 February 2001.

19    Although rent was in arrears at that point, Mr Hadley submitted that the defendant, by the covering letter with which the Notice of Termination was sent, elected to affirm the lease in a way which was inconsistent with the contemporaneous statement of intention to terminate it. He pointed to the following sentence in that covering letter in relation to payment by personal cheque rather than by one of the means stipulated in the letters of 30 and 31 January 2001:

“Please rectify forthwith. Our client will not accept any further personal cheques.”

20 Mr Hadley laid emphasis on the first three words, but I am not prepared to hold that this amounted to such an affirmation of the lease by the defendant as to deprive the Notice of Termination of such force as was left to it by s.129 of the Conveyancing Act. It must be remembered that there were two leases and that the cheque in question (the cheque for $4,552.53) related also to the reception lounge lease which was not the subject of any purported termination.

21    I should add here that the fact that the plaintiff sent on 2 February 2001 a further cheque drawn on the joint account after the defendant had stipulated for bank cheque, money order or cash cannot be regarded as a repudiation of the lease by him. The tender of that cheque was, in the belief of the plaintiff’s solicitors (albeit a misguided belief), a proper means of performing the lease. The tender was thus intended to confirm the existence of the lease as a source of obligations rather than to deny it.

22    Rent was unpaid when notice was given by the defendant on 7 February 2001 and remained unpaid for some weeks thereafter or, more precisely, until the payments made by bank cheque on 28 February 2001 to be mentioned presently. It follows that the lease of shop 2 was validly terminated in consequence of the Notice of Termination of 7 February 2001 and in exercise of the right of termination made available by clause 6.1 of the lease in the event of non-payment of rent.

The plaintiff’s claim for relief against forfeiture

23 This makes it necessary to address the plaintiff’s claim for relief against forfeiture. In that connection, Mr Hadley for the plaintiff and Mr Potts for the defendant were agreed that the governing principles for a case such as this, involving termination solely for non-payment of rent, are those enunciated by Hope J (as he then was) in Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW Ltd (1970) 2 BPR 9562. That case, like this, involved forfeiture for non-payment of rent and not upon any other ground. Hope J held that, in equity, ge

24 Generally the power to re-enter or forfeit for non-payment of rent is regarded as a security for the payment of rent and, provided the lessor and other persons concerned can be put in the same position as before the forfeiture or re-entry, the lessee is entitled to be relieved against forfeiture upon payment of rent, costs and interest and other expenses. Hope J quoted with approval the following statement by Lord Greene MR in Chandless-Chandless v Nicholson [1942] 2 KB 231:

“The court of equity … always regarded the condition of re-entry as merely being security for payment of the rent and gave relief if the landlord could get his rent.”

Hope J emphasised, however, that payment of rent does not produce a right to automatic relief. He said:

“Despite these general statements, it is clear that the lessee is not entitled to relief as of right, and that the court has a discretion in the matter, even though it may only be in very special circumstances in which relief will be refused.”

25    Some weeks after 7 February 2001, the plaintiff paid to the defendant a sum sufficient to clear all arrears of rent on both leases. This was done initially by means of a bank cheque for $7,504.44 sent by the plaintiff’s solicitors to the defendant’s solicitors on 28 February 2001, and later by a cash payment made at the defendant’s registered office in Pitt Street, Sydney to cover the rent for April 2001. It follows that if the plaintiff also pays the costs and expenses to which the defendant has been put by the present proceedings insofar as they concern termination of the lease and relief against forfeiture, the plaintiff is entitled to succeed upon his application for relief against forfeiture, assuming the absence of any other factor which would cause a Court of equity to exercise its discretion against the grant of such relief.

26 Because rent has been paid up to date, the plaintiff is entitled to relief against forfeiture unless “very special circumstances” (in the words of Hope J) are shown which effectively defeat that entitlement. Basing himself on Legione v Hateley (1983) 152 CLR 406 and Leads Plus Pty Ltd v Kowho International Pty Ltd (2000) 10 BPR 18085, Mr Hadley for the plaintiff submitted, and I accept, that the test to be applied here is one of unconscionability: whether, in the light of the tenant’s remedying of the default in the payment of rent, resort by the landlord to his strict legal right of re-entry would be unconscionable; or, if I may put this another way, whether the tenant has been guilty of conduct over and above the remedied default in payment of rent which is of such gravity that, even accepting that the default for which the right of re-entry is security has been satisfied, it would not be unconscionable on the landlord’s part to insist on his strict legal right.

27    Another dictum as to the nature of relief against forfeiture may usefully be quoted. In Courtney Creche Pty Ltd v Okko’s Fine Art and Custom Framing Pty Ltd (unreported, 22 June 1995), Young J said:

“The current state of the authorities is that before a tenant is refused the remedy of relief against forfeiture, the tenant’s attitude to the lease must be such that no reasonable landlord could expect the tenant to honour its obligations.”

28    Unconscionability will prevent insistence by a landlord on his legal right unless that landlord needs the protection of termination because the expectation of a reasonable landlord would be that the tenant will not honour his obligations.

Disentitling factors asserted by the defendant

29    This part of the defendant’s case involved an examination of the plaintiff’s conduct on two levels: first, in relation to the subject premises (shop 2); and, second, in relation to matters involving the reception lounge.

30    There is a threshold question here as to whether conduct of a tenant not directly related to the lease and premises in question can properly be taken into account in determining an application for relief against forfeiture. There is no need to attempt any general answer to that question in this case. It is sufficient to say that, in the particular circumstances of this case, the two leases entered into at the same time in relation to different parts of the one building may be regarded, for practical purposes, as creating a composite single relationship which, in its totality, provides the context in which the plaintiff’s conduct should be examined. I did not understand counsel for either party to suggest otherwise. It is, however, important to remember that termination of the lease of shop 2, were it to occur, would do nothing to disturb the continuity of the lease of the reception lounge.

31    The factors which the defendant regards as constituting grounds of which the Court should, in this case, exercise its discretion against the grant of relief to the plaintiff are, in effect, fourfold: first, that the plaintiff has been guilty of other breaches of the covenants of the lease of shop 2; second, that there are serious questions about the plaintiff’s ability to pay future rent under that lease; third, that the plaintiff has been guilty of breaches of the covenants of the lease of the reception lounge; and, fourth, that the plaintiff has been guilty of aggressive and violent conduct at 95 Gibson Avenue, Padstow.

Alleged disentitling factors - other covenants of the shop lease

32    The breaches of the lease of shop 2 to which the defendant points, over and above the failure to pay rent, relate to the covenant to pay a bond, the covenant to pay the defendant’s costs of and incidental to the preparation of the lease and the covenant to effect public liability insurance and to furnish a copy of the insurance document to the defendant.

33    It is true that the lease required the bond and the lessor’s costs to be paid by the plaintiff promptly upon the execution of the lease. It is also true that some time elapsed before the plaintiff paid. Although the plaintiff said in cross-examination that he had read the lease and that its terms had been explained to him, it is clear that, as a practical matter, he put more store by personal contact with Mr Cipolla than he did by detailed examination and analysis of the lease terms. Thus, he testified that he had, on 1 August 2000, asked Mr Cipolla how much the bond was so that he might pay it and that Mr Cipolla had told him to come back next week. Mr Cipolla gave evidence that such an approach had been made, although he did not put a date to it and said the conversation ended after the plaintiff’s question and before any reply by him because the plaintiff had to take a phone call. The plaintiff’s father (who acted as manager of take-away food business conducted at shop 2) also gave evidence of inquiries made of Mr Cipolla as to when and how the bond should be paid. According to the plaintiff and his father, Mr Cipolla made it clear that payment of the bond was not, for him, a matter of great importance or priority and that, in any event, he was not sure in whose favour a cheque for the bond should be drawn. The following question was put to Mr Cipolla in cross-examination:

“You didn’t ask him to pay the bond in May or June or July, did you?”

He replied:
“When they read the lease - they didn’t ask because they didn’t see the lease. When they saw the lease they ask me.”

The plaintiff’s father said in cross-examination:
“When we … my son sign the lease with Pasquale, I was asked by my son to help him to run the business. We approach Pasquale for the bond of the shop and the reception. His answer was ‘Don’t worry about the bond at the moment, run the business, make some money and later on you pay me.’ I had my cheque or my son cheque available to pay at the beginning when we sign the lease for to pay for the bond and the months in advance, he said, ‘Don’t worry about it, no need for it now.’”

34    It is clear from this that the plaintiff was, in a practical day to day sense, mindful of the obligation to pay the bond and, as Mr Cipolla himself said, the plaintiff raised with him direct in conversation his requirements in that respect. Furthermore, when it was made clear to the plaintiff what he should do to discharge his obligation in relation to the bond, he attended to the matter.

35    A generally similar picture emerges in relation to the legal costs. The solicitor who acted for the plaintiff in relation to the lease was his brother Charly, an employee of the firm of Jones King. He gave evidence that, although a memorandum of fees totalling $740 (exclusive of stamp duty and registration, shown as “to be advised”) had been delivered by the solicitors for the defendant on or about 10 May 2000, there was a dispute about the amount of costs which he had had to take up and resolve with those solicitors. Evidence about payment of legal fees was also given by the plaintiff’s father who acted as manager of the shop business. He deposed to attempts to discover the amount to be paid and to having been informed of that amount on 17 June 2000 when the defendant’s solicitor attended at shop 2 with Mr Cipolla. The amount was $1,380 for both leases and the plaintiff’s father there and then wrote a cheque for that amount and gave it to the defendant’s solicitor.

36    The requirement of the lease in relation to public liability insurance was that the plaintiff, as tenant, effect cover for $15m. There was a matching provision in the reception lounge lease. The plaintiff in fact effected cover for $5m in respect of shop 2 and $5m in respect of the reception lounge. The figure of $5m was chosen by the plaintiff on the advice of his insurance brokers who considered it an appropriate sum. The plaintiff says that he did not become aware of the requirement for cover of $15m until 31 January 2001 and that on that same day the cover was increased to that level. Again, therefore, there was inattention by the plaintiff to the strict letter of the lease but a general awareness of his obligations, coupled with prompt action to put things right as soon as Mr Cipolla or his representative made it clear what was needed.

37 As with the covenant to pay rent, these other breaches by the plaintiff of the shop lease covenants to which the defendant points as relevant to the exercise of the Court’s discretion have been remedied. Furthermore, they were remedied with reasonable dispatch once the plaintiff understood what he had to do. To my mind, none of these matters furnishes any ground which the Court should regard as so exceptional as to displace the expectation that relief against forfeiture should be granted. I base that conclusion on the same considerations as produced the same conclusion on the part of Ormiston J in Jam Factory Pty Ltd v Sunny Paradise Pty Ltd [1989] VR 584.

Alleged disentitling factors - plaintiff’s financial capacity

38 Any assertion that relief against forfeiture should be refused because of the plaintiff’s financial position fares no better. It is true that, if it is shown that the tenant is unable to pay future rent (or may reasonably be expected to become so), the Court will in all probability find that it is not just and equitable to grant relief against forfeiture: see, for example, Direct Food Supplies (Vic) Pty Ltd v DLV Pty Ltd [1975] VR 358. In the present case, however, it was shown that the plaintiff had $20,000 on term deposit with the Commonwealth Bank and he testified that that sum would be available for the expenses of his businesses conducted at 95 Gibson Avenue (including rent on shop 2), should it be needed. Evidence presented by the defendant that balances in the joint account had fluctuated widely and that there had been, at one stage, a credit balance of only about $15 is not of any great value on the issue of financial capacity. It is clear that that account receives substantial deposits when the plaintiff is paid for functions conducted at the reception lounge. The evidence about the general frequency of such functions makes large movements in the account balance unsurprising.

Alleged disentitling factors - hosing of the reception lounge

39    While the plaintiff’s conduct under and in relation to the lease of shop 2 was thus not such as to disentitle him to relief from forfeiture in the particular context of non-payment of rent, the defendant points to conduct in relation to the reception lounge which it asserts as sufficient to cause the Court to withhold such relief. That conduct relates mainly to the way in which the plaintiff cleaned certain parts of the reception lounge.

40    When the plaintiff took over the reception lounge, it was in a poor state of cleanliness and that he had to do a great deal of initial cleaning. He used a hose to wash parts of the premises. He also used the hose for cleaning purposes on several later occasions, specifically an occasion on which a coca cola machine had misfunctioned and deposited sticky syrup on the floor and occasions on which use of the male toilets by large numbers of persons at functions had left that part of the premises in need of particular attention by way of cleaning. The plaintiff said that hosing was necessary to ensure that relevant areas were properly cleaned and that anything less, such as mopping, would not be sufficient. He said that hosing had been employed in similar circumstances in other hospitality establishments where he had worked.

41    The evidence about water penetration when the plaintiff used a hose in the reception lounge referred to both the estate agency now occupied by Mr Elliott and the newsagency now occupied by Mr Skrzypek.

42    Mr Skrzypek gave evidence. He said that he had carried on his newsagency business as a tenant at 95 Gibson Avenue since 1987, occupying initially the shop which is now Mr Elliott’s estate agency and, since January 2000, a different shop. The premises which Mr Skrzypek occupied initially for some thirteen years were, he said, penetrated by water “about half a dozen times”. This was, of course, before the plaintiff occupied the reception lounge. Mr Skrzypek deposed to one occasion during his occupancy of the current estate agency premises when the refrigerator upstairs stopped working and defrosted, causing the bar area to become wet with subsequent leakage into his premises. On another occasion, a member of the staff upstairs forgot that the plug was in the sink and, as the tap was leaking, the sink overflowed and the bar area became wet and leaked into Mr Skrzypek’s premises. Mr Skrzypek further deposed that, since the plaintiff took over the reception lounge, water had penetrated his current premises when the plaintiff had washed parts of the reception lounge with a hose and that it had been necessary for him to cover items in the newsagency to protect them from water damage.

43    Mr Skrzypek also gave evidence of complaints to the defendant about this water leakage. He said that he complained to Mr Cipolla on each of the “half a dozen” occasions when penetration occurred before the plaintiff’s occupation of the reception lounge; and that he had made three complaints to Mr Cipolla since the plaintiff took up possession of the reception lounge.

44    Mr Cipolla gave evidence about the water penetration. He at first denied that there were problems with water escaping from the upstairs premises to those below. But he then said in cross-examination:

“Q. He [Mr Skrzypek] said that water had gone from the reception lounge into premises below and that had happened over a period of many years and that’s true, isn’t it?
A. He never mention to me that, he never say anything to me.
Q. But you know that has been happening, don’t you?
A. Well, if they go with hose, of course the water go down.
Q. Look at your paragraph 5, the last sentence?
A. Five?
Q. Yes, last sentence, ‘nor was there any problem with the water escaping from the top premises into the premises situated downstairs’. You know that is wrong, don’t you?
A. No, it’s not wrong.
Q. And you know that what Mr --
A. There wasn’t any problem, nobody told me before.
Q. You say there was no problem but you know that water has been moving in that way for many years?
A. When you go with water, with hose.
Q. Yes?
A. Before they didn’t use the hose. They didn’t have the problems.”

45    I find that water did penetrate from the reception lounge to premises below on several occasions on which the plaintiff used a hose to clean parts of the reception lounge.

46    The defendant’s Cross-Summons raises squarely the question whether the use of the hose by the plaintiff in this way amounted to a breach of the covenants of the lease of the reception lounge. The only provision which appears to be pertinent is clause 6.3.2 which, so far as relevant, reads as follows:

“The tenant must not … use the property … for any activity … that is or may become a nuisance or annoyance to the landlord or to the owner or occupier of any neighbouring property.”

47    Any attempt to bring the plaintiff’s hosing activities within this clause encounters the immediate difficulty that the central words of the prohibition upon the tenant are “must not … use the property … for any activity” of the kind described. Someone who cleans leased premises, by whatever means, does not thereby “use” them for the “activity” of cleaning. While cleaning is no doubt an activity, it is not one for which premises are “used”. The concept of use or user relates to the purpose for which the premises are employed, as distinct from activities incidental to the pursuit of that that purpose. It is therefore not possible to hold that the acts of hosing constituted a breach by the plaintiff of clause 6.3.2. That is not to say that the plaintiff may not have become liable on some independent basis for any damage occasioned by his acts of hosing. But that is not a matter which arises from the Amended Summons or the Cross-Summons; nor was it addressed in submissions. I therefore say no more about it.

48    Finally, in relation to the hosing, I note that the plaintiff is of the view that the defendant should make the reception lounge more waterproof and has told Mr Cipolla this. The plaintiff obtained a quotation from a builder for work towards that end, although I am not prepared to find one way or the other whether that work is necessary. Mr Cipolla, for his part, says he would not willingly undertake this work unless he could recover the cost through an increase in rent. I infer, therefore, that the exerting of pressure by the defendant upon the plaintiff in relation to the hosing of the reception lounge and the related financial issue is a factor in the defendant’s attempts to press home the termination of the lease of shop 2.

Alleged disentitling factors - tiling and new door of reception lounge

49    Finally in relation to the reception lounge lease, I should mention the defendant’s complaint that the plaintiff, without consent, tiled the doorway at street level with slate tiles and installed a new street door. The plaintiff says that the defendant, through Mr Cipolla, did give consent and that, in any event, the works represented an improvement to what was a dilapidated appearance. It is more likely than not that Mr Cipolla did give such consent or, at least, show himself to be generally content but, whatever may be the truth about that, these matters seem to me to be of little, if any, relevance to the exercise of the Court’s discretion on the question of relief against forfeiture.

Alleged disentitling factors - assault

50    The last matters for consideration are an alleged assault by the plaintiff upon Mr Elliott, the tenant in the estate agency already mentioned, and an allegation that the plaintiff spat on Mr Cipolla. Both these things were said to have happened on 5 January 2001.

51    Evidence about the alleged assault upon Mr Elliott was given by the plaintiff, Mr Elliott and Mr Cipolla. Mr Elliott said that the plaintiff struck him on the arm with a fist in which a set of keys was clenched and broke the skin. The plaintiff denied this. Mr Elliott also said that Mr Cipolla was present throughout and able to witness the full extent of the event. Mr Cipolla, by contrast, admitted he was present but said that he had seen the other two “moving their hands as if want to attack each other” and that “they were just grabbing and moving their hand on top of each other”; also that he became frightened, turned around and moved away. These events occurred inside the estate agency after the plaintiff allegedly came there to say that he was about to use the hose upstairs. The failure of Mr Cipolla to confirm the account given by Mr Elliott is particularly significant. On the evidence before me, I am satisfied that an argument and altercation some form of took place between the plaintiff and Mr Elliott when the former went to the estate agency to announce his intention of hosing upstairs. But I am not satisfied that the plaintiff struck Mr Elliott in the way Mr Elliott described.

52    As for the alleged spitting incident, Mr Cipolla said that the defendant spat on him and the defendant denied having done so. Again, I am not satisfied that this occurred but, even if it did, it is not of itself sufficient to justify denial of the relief the plaintiff seeks.

53    The matters just referred to have caused various proceedings to be instituted in the Bankstown Local Court by both Mr Cipolla and Mr Elliott against the plaintiff. These are unresolved but again I infer that, so far as they involve Mr Cipolla, these are a factor in the defendant’s attempts to press home the termination of the lease of shop 2.

Relevance of hosing and alleged assaults

54    I have gone into some detail of the matters concerning the hosing of the reception lounge and the alleged assaults because they are, to my mind, the only matters which might even conceivably constitute “very special circumstances in which relief will be refused” of the kind to which Hope J referred to in Pioneer Quarries. In my judgment, however, although the plaintiff was misguided in insisting upon hosing upstairs and caused friction and some acrimony by doing so, that conduct - relating as it does to the reception lounge and a lease as to which there has been no attempt to terminate - should not stand in the way of the relief against forfeiture which is, as it were, the plaintiff’s prima facie entitlement in relation to the lease of shop 2. Nor should the spitting incident, if it occurred. Continuation of the reception lounge lease, even in the atmosphere of disharmony which prevails, can have no bearing upon the defendant’s expectations as to whether the plaintiff will in future honour his obligations under the lease of shop 2.

The proposed assignment of the shop lease

55    There is another matter which must now be mentioned. The plaintiff has, by contract entered into on or about 7 February 2001, agreed to sell the take-away food business conducted in shop 2. The price provided for in the contract is $14,000. Transfer of the lease of shop 2 is contemplated by the contract.

56    In anticipation of this contract, the plaintiff’s solicitors wrote to the defendant’s solicitors requesting consent to assign the lease. On 30 January 2001, the defendant’s solicitors replied:

“Your client is not entitled to any assignment as he is in breach of the Lease. However, our client will not object to giving a new Lease to an incoming Lessee (if approved by the Lessor), i.e. a purchaser of the Take away business, but under no circumstances will our client give any consent as your client is only on a Monthly tenancy having breached the Lease earlier.”

57    The following day, 31 January 2001, the plaintiff’s solicitors replied. Their letter read in part as follows:

“It has long been your client’s wish that our client no longer remain at these premises and we would have thought that your client would be more than happy to see him leave. Your client’s actions are an attempt to bring undone the sale of the business and should this be achieved, we will seek to be compensated by your client.”

58    The assertion by the defendant’s solicitors that the plaintiff’s tenancy had become a tenancy from month to month was misconceived. But whether or not that assertion was correct, the defendant’s willingness to grant a new lease to a buyer of the business but not to consent to an assignment of the existing lease is curious. The choice can have nothing to do with the solvency or suitability of any new tenant. The only inference which seems to be available is that the defendant wishes to have an opportunity to seek terms more favourable to itself through the negotiation of a new lease with a buyer of the business, rather than to see that buyer merely succeed to the terms of the existing shop lease.

59    The plaintiff seeks a declaration that the defendant has unreasonably withheld consent to assignment of the lease to the buyers under the contract for the sale of the business, The Nhan Tran and Linda Pham. However, there is no evidence before me that the plaintiff has complied with the necessary prerequisites for obtaining that consent as prescribed by clause 4.2(b) of the shop lease including, in particular, furnishing to the landlord evidence that the proposed assignee is financially sound with experience in and a good reputation for carrying on a business permitted under the lease. Nor can the expression of willingness on the part of the defendant to grant a new lease to an incoming business owner “if approved by the lessor” be regarded as any form of waiver in respect of that clause 4.2. The plaintiff is therefore not at present entitled to any such declaration.

Conclusions and relief

60    My conclusions on the various matters in contention between the parties and relevant to the relief sought in the Amended Summons and the Cross-Summons are as follows:

1. The defendant’s notice of 7 February 2001 in respect of the lease of shop 2 provided an effective basis for the termination of that lease for non-payment of rent and that lease was effectively terminated by the defendant on that ground.
2. The plaintiff is, however, entitled to relief against forfeiture and none of the matters asserted by the defendant as grounds upon which the Court should refuse relief against forfeiture justifies such refusal.
3. No subsisting or continuing breach of any covenant on the part of the plaintiff as tenant contained in the lease of shop 2 is established.
4. The lease of the reception lounge continues to be a valid and subsisting lease.
5. With respect to the hosing at the reception lounge and resulting water penetration, the evidence before the Court in these proceedings does not support any finding that the plaintiff has breached any provision of the lease of the reception lounge by so hosing.
6. In the absence of delivery by the plaintiff to the defendant of the evidence referred to in clause 4.2(b) of the lease of shop 2, the defendant has not unreasonably withheld consent to the assignment of the lease of shop 2 to The Nhan Tran and Linda Pham.
7. Because of the conclusions as to termination of the lease of shop 2 and relief against forfeiture, the plaintiff should pay all costs of the proceedings relevant to those issues and, as there have been findings adverse to the plaintiff regarding refusal of consent to assignment of the lease of shop 2, my inclination is towards an order that the plaintiff also pay the balance of the defendant’s costs.

61    Having indicated my conclusions on the substantive matters relevant to the relief claimed in both the Amended Summons and the Cross-Summons and my reasons for those conclusions, as well as my views on the matter of costs, I will stand the matter over to enable Short Minutes of Orders to be brought in reflecting those conclusions and, if necessary, I will hear submissions on them. I will also hear further submissions in relation to costs.

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Last Modified: 04/09/2001