MOTEKS PTY LTD v MATTHEWS PASTORAL CO PTY LIMITED [1998] NSWCA 287

MOTEKS PTY LTD v MATTHEWS PASTORAL CO PTY LIMITED

SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL

5 PRIESTLEY JA, MEAGHER JA and SHELLER JA 5 March 1998

[1998] NSWCA 287 LEASE — breach of a covenant of the lease — default resulting in notice of termination — misconstruction of the covenant argued.

On appeal 15 The appellant submitted: 1. Windeyer J misconstrued covenant 3(e) by treating the motel business and the restaurant business as disjunctive. 2. On a proper reading of the covenant, there was one business being conducted on the premises consisting of two separate elements; motel accommodation and the restaurant. 3. As there were these two separate elements, the lessee proprietor could decide in what 20 proportions, of the business as a whole, these elements should be run. Held

1. When construing covenant 3(e), Windeyer J clearly treated the restaurant as one element of the whole business being conducted by the lessee; 2. Windeyer J correctly found that to comply with covenant 3(e), the lessee must 25 conduct a licensed restaurant as a requisite element of the overall business; and 3. that upon Windeyer J's construction of covenant 3(e) (and also that of the lessee's solicitor), upon the facts regarding the operation hours of the restaurant as found by Windeyer J, the lessee was in breach of the covenant.

Priestley JA. The appellant filed a summons in the Equity Division claiming

30 a declaration that its lease of the Burvale Motor Inn in Albury had not been terminated and claiming further associated declarations. The summons was heard by Windeyer J who dismissed it on 25 June 1997. The appellant lessee then appealed.

The reasons for Windeyer J's decision were as follows.

35 The lease was in a form registrable under the Real Property Act and was for a term of three years commencing on 3 August 1995 with options to renew. It incorporated a number of provisions appearing in an annexed schedule. This schedule contained a number of covenants by the lessee relating to the use of the demised premises. One of these was covenant 3(e) which provided that the lessee