United Petroleum Pty Ltd v Coastal Service Centres Pty Ltd

United Petroleum Pty Ltd (the appellant) appealed to the Court of Appeal of the Supreme Court of New South Wales against a judgment of the Equity Division concerning a commercial lease. The dispute arose from the appellant's purported termination of the lease following fire damage to the leased premises. The respondent, Coastal Service Centres Pty Ltd, argued that the termination was invalid.

The central legal issues before the Court of Appeal were: (a) whether the landlord's belief that repairing the leased property after fire damage was "impracticable or undesirable" needed to be objectively reasonable, or merely genuinely held in good faith; and (b) whether the notice of termination, which relied on this belief, was given within a reasonable time after the damage occurred and after the landlord formed its opinion.

The Court of Appeal held that the criterion for the landlord's power to issue a notice to terminate was the landlord's genuine belief that repair was impracticable or undesirable. While the belief must be held in good faith, it did not need to be objectively reasonable, provided the witness giving evidence of the belief was credible and their belief was not "glaringly improbable." The Court noted that the witness possessed expertise to form such a belief, and there was no expert evidence to contradict the reasonableness of their assessment. Furthermore, the Court found that the notice was given within a reasonable time, with the period for reasonable time commencing from when the damage occurred and extending to when the landlord formed the opinion permitting service of the notice.

Consequently, the Court of Appeal dismissed the appeal from the judgment and orders of the Equity Division and ordered the appellant to pay the respondent's costs.