CITATION: Knazovika v Wong [2010] NSWADT 194 DIVISION: Retail Leases Division APPLICANT Bonna King Knazovika PARTIES: RESPONDENT Shirley Nga Ching Wong FILE NUMBER: 105064 HEARING DATES: 9 June 2010 SUBMISSIONS CLOSED: 9 July 2010 DATE OF DECISION: 30 July 2010 BEFORE: Molloy G - Judicial Member CATCHWORDS: Exercise of option LEGISLATION CITED : Conveyancing Act 1919. Bella Fruita Pty Limited v. Nyrang Holdings Pty Limited [2000] ACTSC 16 Bowman v. Durham Holdings Pty Limited [1973] HCA 55 Leads Plus Pty Limited v. Kowho Intercontinental Pty Limited [2000] NSWSC 459 CASES CITED: Chronopoulos v Carossel Pty Ltd [2010] NSWADT 191 Gilbert J McCaul (Aust) Pty Ltd v. Pitt Club Ltd (1954) 76 WM (NSW)72 Subway Realty v. The Investment #1 Pty Limited [2010] NSWADT 123 Spuds Surf Chatswood Pty Limited v. PT Limited [2007] NSWADT 130 APPLICANT In person REPRESENTATION: RESPONDENT G Holzman instructed by Michael Jassy & Associates 1.I vacate all injunctions and urgent interim orders made 6 May 2010, 20 May 2010 and 9 June 2010 ORDERS: 2.I dismiss the Application for Original Decision and the Application for Urgent Interim Orders, both filed 28 April 2010 3.I declare that the Applicant has not exercised the option 4.No order as to costs; save that should either party file and serve an Application for costs coupled by appropriate submissions, within 14 days, then the other party is to file and serve its reply within a further 14 days; and the Tribunal will make a decision on the papers as permitted by the Administrative Decisions Tribunal Act 1997, s.76, unless persuaded that there should be oral submissions. REASONS FOR DECISION Background 1 The Applicant is the lessee of premises known as Shop 2, "Cremorne Town Centre", 287 Military Road Cremorne, being Lot 6 in SP64303. The Applicant has been in occupation of this shop for ten years. The original lease expired 30 April 2005; the Applicant exercised her option to renew the lease; the new lease was for a term of five years commencing 1 May 2005 and terminating 30 April 2010, registered AB80847J ("the lease"). This lease contained an option for renewal for a term of a further five years commencing 1 May 2010 and terminating 30 April 2015. 2 The lease specified the lessor as being "Cremorne Town Centre Pty Limited", a corporation. At a time not specified in the evidence, the Respondent purchased the strata title Folio Identifier 6/SP64303 and thus became the lessor. 3 Difficulties arose between the parties, primarily relating to the late payment of rent and, importantly, the application of the bank guarantee to meet part of the rent arrears. 4 On 15 January 2010 the Applicant purported to exercise the option to renew by sending to the Respondent a pre-paid letter posted 15 January 2010. The Respondent denies receiving this letter; the Respondent says that the letter does not exercise the option such that the lease has expired and the Applicant should vacate the premises. 5 The Applicant, by Application for Original Decision filed 28 April 2010, seeks an order that she "be granted a new lease in accordance with clause 25 of the lease between the Applicant and Cremorne Town Centre Pty Limited and assigned to the respondent". 6 In order to get a grip on the issues it is firstly necessary to examine the terms of the lease and then review the history of the relationship between the parties and the correspondence that flowed including, in particular, the letter 15 January 2010. The Lease 7 I propose under this heading to identify relevant clauses/provisions of the lease that bear upon the issues agitated. 8 The lease is registered. The lessee is stated to be "Cremorne Town Centre Pty Limited", a corporation. 9 The term of the lease is five years commencing 1 May 2005 and terminating 30 April 2010. The lease contains a five year option; the rent for which (if exercised) would be market rent (cl. 25). 10 The Tribunal did not have before it any Disclosure Statement. Rather, and from looking at the terms of the lease itself, it is plain that the demised premises form part of a retail shopping centre where (and doing the best that I can on the evidence) the centre is subject to strata title and subject to various determinations of the Owners' Corporation. The demised premises form part of what is described as the "Cremorne Town Centre" in which there are, as is normal, various common areas and specified food outlets. The Applicant's business is, however, that of "retailing of ladies' apparel and accessories". The lease also provides (cl.1) that where the lessee is not a corporation references "appropriate to a corporation shall be construed as having similar meaning but with reference to a natural person …" 11 By cl.8.03 the Applicant/lessee was required to provide a bank guarantee (by way of security deposit) "for an amount equal to six months Rent plus GST". The bank guarantee has never been six months rent but rather two months rent. This situation arose because the clause requires the security deposit "by (the) original lessee to be a cash deposit equal to two months rent plus GST" (my italics). The clause therefore provides that while the Applicant is the lessee the two months deposit will be that which is required, in the form of a cash deposit. (However, on the evidence it would appear that the parties conducted their affairs on the basis that one should read "bank guarantee" for "cash deposit"). Presumably, and by inference, should there be an assignment from the Applicant the assignee would then have to put up a bank guarantee equal to six months rent plus GST. 12 Cl .20.01 provides (relevantly) that should Cremorne Town Centre Pty Limited as lessor transfer its interest the lessee/Applicant "must obtain a replacement bank guarantee … in favour of) the assignee … and … must enter into those documents and assurances the Lessor or the other person requires to enable the other person to enforce the benefit of all obligations owed … in that other person's name". This is an important clause because, although there was no documentation led in evidence, I have assumed that all documentation was appropriately entered into that would enable the Respondent, as purchaser/assignee, to receive rent, recover arrears, enforce the bank guarantee and the terms of the lease. There was no suggestion to the contrary. 13 Cl. 20.04 is a standard holding over clause. 14 Cl. 19 deals with default. The clause itself is quite draconian because, in substance, it states that in the event that rent or any part thereof is in arrears for fourteen days or default is made in the fulfilment of any covenant, condition or stipulation "thereupon this lease shall determine cease and be at an end". Cl. 19.06 makes it plain that the payment of rent and the provision of the security deposit/unconditional bank guarantee are "essential terms of this lease, and any breach or failure to observe or satisfy any one or more of the (essential terms) shall entitled the Lessor to all such rights and remedies as are available under the general law (whether at law, in equity or otherwise) in respect of a breach or failure to observe or satisfy an essential term". 15 Cl. 20.06 provides that no waiver of any breach shall operate as a waiver of any other breach; any demand, or the acceptance of rent or other moneys payable, or any delay in exercising a right shall not constitute a waiver; neither shall any "custom or practice" constitute a waiver "or lessen the right" of the lessor to insist upon its performance. 16 A very important clause is cl. 20.08. This deals with notices. It is appropriate to set it out in full as follows: "20.08 (Notices) Any notice from the Lessor to the Lessee shall be deemed duly served if sent by facsimile machine to the Lessee's facsimile machine or left for the Lessee on the Premises of if mailed by prepaid letter addressed to the Lessee at the place of business or abode of the Lessee set out in Item 4 of the Reference Schedule and any notice from the Lessee to the Lessor shall be deemed duly served if mailed by prepaid letter addressed to the Lessor at its registered office and provided a copy of any such notice has been delivered personally to any management office located in the Building. A notice or demand posted shall be deemed to be duly served at the expiration of forty eight (48) hours after the time of posting and any notice given by one party to the other underunder may be signed on behalf of the party giving the same by a solicitor director manager secretary acting secretary or duly authorised agent of such party." The Respondent relied heavily upon this clause. 17 Similarly, the other important clause (for the purposes of this Decision) is clause 25 dealing with the option to renew. Relevantly, for the purposes of this Decision, it is the first paragraph of this clause that requires analysis, and it is set out hereunder: "If the Lessee desires to have a further lease of the Premises for a further term of years specified in Item 22 of the Reference Schedule and provided: (i) in respect of the further lease the Lessee shall give to the Lessor written notice to that effect not more than six (6) months nor less than three (3) months prior to the expiration of the Term of this Lease; and (ii) the Lessee shall neither at the date of such exercise of option nor at the date of expiry of the Term of this Lease be in default in respect of the performance of the terms, covenants, conditions, by and on the part of the Lessee herein contained; the Lessor shall grant to the Lessee a lease of the Premises for such further term of years specified in Item 22 of the Reference Schedule commencing on the day following the date of expiry of this Lease and otherwise subject to the same terms, covenants and conditions as are contained in this Lease .." The clause goes on to make various amendments to the lease to be entered into once the option is exercised, including review to market rent, lease term and so on. Recent History 18 There is no doubt that the Applicant's payment of rent since about April 2009 has been less than satisfactory but, that having been said, and although payments have not been made strictly in accordance with the lease, payments have in fact been made such that by March 2010 the arrears were only $1,055.00. 19 The rent required to be paid from May 2009 was at the rate of $3,230.55 per month. These monthly payments were not made in the manner specified in the lease, but rather in varying different amounts. For example, in May 2009 the Applicant paid $1,050.00 on 11 May, $600.55 on 19 May, $600.00 on 22 May and $350.00 on 28 May. Similar irregular payments were made during the course of the lease – for example in January/February 2010 the Applicant paid $600.00 on 13 January, $700.00 on 18 January, $490.00 on 2 February, $40.50 on 2 February and $500.00 on 17 February. I shall deal with the issue of arrears later in this Decision but suffice it to say at this point firstly, the Applicant's ability to make payments strictly in accordance with the lease was clearly, and detrimentally, affected by adverse trading conditions; and secondly, the Respondent purchased the demised premises "with the assistance of borrowed funds" and (she has) been paying, and continues to pay, interest on these borrowings in; thus the failure by the Applicant to comply with her lease contract obligations has resulted in interest being incurred by the Respondent – her evidence is that she has "incurred interest payments now exceeding $1,743.00". In addition, it also follows from the terms of the lease, that the Applicant is indebted to the Respondent in relation to interest on unpaid rent – Exhibit 4 seems to show that interest, calculated at 12.7%, being $7,183.45. 20 The Tribunal had before it a number of letters of demand relating to outstanding rent. For example on 27 October 2009 the solicitor for the Respondent wrote, asserting arrears of rent at 29 September 2009 in $8,142.00, drawing the Applicant's attention to cl.8.04 of the lease, making demand for $11,372.75 (inclusive of the October rent) and noting they were instructed that the Respondent "is relying on the National Australia Bank Guarantee dated 10 September 2004 to recover $5,741.00 of the amount (owed) for unpaid rent …". 21 The Applicant responded by handwritten letter 30 October 2009, putting forward a payment plan and suggesting that the Respondent take the bank guarantee in $5,741.00 and asking the solicitors to inform the Respondent "that this is the only way to pay the outstanding balance on rent on shop 2 after difficult times and with intention back to normal in the future. Please respond ASAP to our proposition". [The underlining is that of the Applicant]. The Respondent's solicitors responded 10 November 2009, noting that the Respondent "has accepted the proposal put by (the Applicant) … (and advised) that the National Australia Bank met its obligations under the Bank Guarantee provided by it … (and gave the Respondent) a cheque for $5,741.00". The letter went on to relevantly observe that the Respondent was "reminded also that the terms of the lease required (her) to maintain a security bond equal to 6 months rent payable. As the Bank Guarantee for $5,741.00 has been used (the Applicant) should provide the appropriate Bank Guarantee as soon as possible". [Pausing at this point, in my opinion that is a misunderstanding of the terms of the Lease because its terms provide only for two months bank security while the Applicant is the lessee]. 22 Proceeding chronologically, the next asserted letter is what I might describe as "the option letter". This was a very live issue in the proceedings. The Applicant's evidence was that on 15 January 2010 at about 10-30 am she posted a letter to the Applicant, addressed to the Applicant at her home address, from the Post Office in Military Road, Cremorne. This evidence was in Exhibit C, Annexures A, B, D and E, the last being an asserted diary note. The option letter read as follows: "Further to my conversation with your solicitor Mr Jassy on 27 October 2009, with this letter I confirm my intention to exercise the option of 5 years lease of the above premises and listed under clause 25 in the existing lease No AB80847J. The new lease will start from 1 May 2010 to 30 April 2005 with new structure of rent. Please inform me about progress in this matter." The evidence showed that this letter was not received by the Respondent. Indeed, the Respondent asserts that the first she knew of the letter was when a copy of it was forwarded to her solicitors by the Applicant's then solicitors, 30 March 2010, as asserted by the Respondent's solicitors by letter 31 March 2010. With reference to the telephone conversation referred to in the option letter Mr Jassy in his letter 31 March 2010 asserted that the Applicant "had indicated that while she might have intended to wish to renew her Lease she has not done so". 23 The next chronological letter is from the strata managers to the Respondent with respect to an assertion that the downlights in the leased premises were connected to the common property power supply and not to the electricity meter of the premises, that the cost of rectification will be $297.00, and that the electricity contractors would be in contact with the Applicant to arrange the transfer of the power supply. A copy was sent to the Applicant. The Applicant wrote on the letter the following words: "1. My lease is expiring end of April 10. 2. Ms Wong is selling shop. 3. She is the owner 4. Lights + neon was installed and gave tenants in arcade as a gift by Ian Hayson. I had no control of lights installation". The Applicant also wrote to the strata managers 5 March 2010 in which she stated: "Display Window light I am responding to your letter dated 3 March 2010 in reference of lights in window at the above shop. 1) Ms Wong is the owner of shop 2) Ms Wong is selling this shop 3) I'm the lessee and my lease is expiring end of APRIL 2010 with possible 5 years option to stay as it is listed on my existing lease. 4) Lights and neon lights were installed by Hayson Group and personally Mr IAN HAYSON generously gave each shop neon lights as a gift. 5) I had no control on .." It was submitted by the Respondent that by these various words the Applicant had accepted that her lease was expiring and that the option had not been exercised. This assertion was also made in correspondence 3 May 2010 where the solicitor for the Respondent advised that his client "vigorously denies having ever received the letter (the Applicant) alleges was posted to our client on 15 January 2010 … (and then makes reference to the handwritten notes on the letter from the Strata Manager in which she is alleged to have stated: "I'm the lessee and my lease is expiring end of January 2010 with possible 5 year option to stay as it is listed on my existing lease. No mention is made of the option having been exercised by letter of 15 January 2010"), and it is asserted that the Applicant "has been and remains in breach of the lease which expired on 30 April 2010 for non-payment of rent and interest". It was then asserted that the total outstanding rent and interest as at 3 May 2010 was $14,645.10 and that "pursuant to clause 25 of the lease the lessee is only entitled to exercise the option of renewal on condition that the lessee is not in default, either at the date of exercise of the option nor at the expiry of the term of the lease. Since (the Applicant) was in default of the lease for non-payment of rent and interest as at 15 January 2010, and has remained in default up to and including today, she has forfeited her right to renew the lease. This is the case irrespective of whether or not (the Applicant) sent (the Respondent) the letter of 15 January 2010 as she alleges". 24 By letter 8 March 2010 to the Applicant the solicitors for the Respondent noted that the Applicant "did not exercise the option for renewal of your lease, for the above-mentioned premises, in accordance with the terms of the existing lease. Accordingly (the Respondent) has instructed us that she will not renew the lease. She has instructed us further, that she intends to sell the shop". Thereafter followed some discussion/ confirmation of the proposed purchase price and there was some suggestion in the evidence that the Applicant was attempting to organise finance for that purpose. Nothing, however, seems to have come from all of that. Was the Option Exercised? 25 Before embarking on this thorny issue it is worthwhile referring to a number of important aspects. Firstly, no party was cross-examined. All material was allowed into evidence without challenge. I reject the Respondent's submission that because the option letter was not received therefore it was not sent. Logically, that does not follow. The evidence shows quite plainly that the Applicant sent the option letter and that it was not received by the Respondent. 26 Secondly, reference should be made to cl.20.08 set out in full above at [16]. It is plain from that clause that the letter, once posted, "shall be deemed to be duly served at the expiration of forty eight (48) hours after the time of posting". Therefore, on those words, it is plain that the letter would have been deemed, as a matter of contract, to have been received on Sunday 17 January 2010. If I am wrong about that interpretation, then at least it would have been deemed to have been received by Tuesday 19 January 2010, two working days later. Thus, once it is proved that the letter had been sent (and I am so satisfied on the evidence) then it is plain that the letter had in fact been received as a matter of contract. 27 Thirdly, clause 20.08 requires the Applicant, as lessee, to not only send a notice by pre-paid letter appropriately mailed but also to provide a copy of that notice to be delivered personally to any management office located within the Cremorne Town Centre. There was no evidence of the existence or location of any management office in the Centre, but no party seemed to want to argue that there wasn't. Having regard to such implied acceptance then it was never explained by the Applicant why she did not deliver a copy of the option letter to the management office. 28 Fourthly, cl.20.08 requires the prepaid letter to be addressed "to the lessor at its registered office" – clearly this is a reference to the original lessor Cremorne Town Centre Pty Limited; but, and by the operation of the terms of the lease where the lessee is not a corporation (see above at [10]), and I take this to mean an assignee of the lessee, then clearly the lease has to be "construed as having similar meaning but with reference to a natural person", thus the reference to the "registered office" must be taken to be a reference to the private home address of the Respondent. 29 Fifthly, it is plain that whatever view one takes of the rental payments, as at 15 January, or 17 January or 19 January, there were arrears under the lease. Having regard to Exhibit 4 and the discussions that flowed at the hearing as a consequence of that Exhibit, it appears plain that as at any of those dates the arrears were $2,630.50. 30 More importantly, in order to reach that arrears position the Applicant had proposed, and the Respondent had accepted, that the bank guarantee be called up. Thus, as at any of those dates, there was a breach of cl.8.03 and Item 11(b) of the Reference Schedule, in that there was in fact no existing bank guarantee for an amount equal to two months rent plus GST. It will also be remembered that this clause was an essential term of the lease (cl. 19.06). 31 Thus it must follow that, even if one excludes outstanding interest, as at the date of the option letter, whensoever deemed to be received, there were rental arrears, a failure to re-instate the bank guarantee, and a breach of an essential term of the lease contract. The Law 32 The answer to the question of whether the Applicant in fact exercised the option is not easily reached. I can firstly dispose of one argument raised by the Applicant, and that is that the offer to pay by instalments was (I infer) somehow a stay of any claim that could be made by the Respondent. The Applicant on a number of occasions referred to Regulation 6.17 of the Uniform Civil Procedure Rules 2005 and to the Form thereunder. She asserted that the letter 30 October 2009 not only covered the period to that date but also "future rent"; she referred to the recession, slow trade and hardship and relied upon UCPR 6.17. It is plain, however, that that regulation "applies to proceedings in which the plaintiff makes a liquidated claim, but makes no claim of any other kind". This is clearly not the case here. No claim is actually agitated, by separate Application or Cross-Application, by the Respondent. What we have in these proceedings is simply a defence by the Respondent to the prayer of the Applicant in her Application filed 28 April 2010. This is not the same as Hardy v. Fou (No 105008 ), decided ex-tempore on 11 March 2010, where both parties had put before the Tribunal all the material upon which they both relied and, although there was no cross-claim or separate application by the Respondent, it was convenient, proper, a saving in costs, and with no prejudice to the Applicant, for the Tribunal to simply (in that case) dismiss the application and make orders in favour of the Respondent with regard to outstanding rent. 33 I now seek to deal with the submission that the option letter in its terms does not itself exercise the option. The Respondent seized upon the words "I confirm my intention to exercise the option " and the words in the Applicant's letter to the strata managers 5 March 2010 "with possible 5 years option to stay". It was submitted that this was not an exercise of option, but rather an indication that the Applicant proposed or intended to exercise the option. I reject that submission. That avoids the clear intent of the option letter and the statement "the new lease will start from 1 May 2010 to 30 April 2015 with a new structure of rent" (my italics). The last sentence "Please inform me about progress in this matter" clearly refers to the preparation of the new lease and the assessment of market rent. All other things being equal, in my opinion, the option letter operates to exercise the option. 34 It was then submitted that because of the words written on the letter from the strata manager, (see above at [23])and/or the letter 5 March 2010 (see also above at [23]) the Tribunal should conclude that there was a waiver, alternatively some form of non-assertion, of any exercise of option. But it is plain to me that the Applicant's words have got nothing to do with the option; rather what she is addressing is the downlights not being installed by her, but rather something that she "acquired" when she originally leased the premises. 35 It seems to me the biggest hurdles to be overcome by the Applicant relate to her failure to deliver a copy of the option letter to "the management office"; her failure to bring her rental payments up to date as at the date of the option letter (or the date of its receipt); and the failure to re-instate the bank guarantee. In addition, there is the thorny question of interest on the arrears which, at least on the Respondent's case, amount to something in the order of $7,183.45 (at April 2010), or $5,021.94 (at January 2010) (figures derived from Exhibit 4). Pausing again, there was no satisfactory argument raised by the Applicant that would persuade me that the figures set out in Exhibit 4 were not correct. Further Consideration 36 I gave leave to both parties to file and serve Written Submissions relating to the option letter. The Respondent did so, making reference to some important cases. The Applicant filed Written Submissions, but primarily by photocopying some of the documents that were already in evidence. 37 During the course of the hearing, and avoiding (if that is possible) the failure to re-instate the bank guarantee and the outstanding interest on the arrears, I was concerned about whether or not there could be an argument advanced on behalf of the Applicant for relief against forfeiture, perhaps along the lines that although the rent had not been paid strictly in accordance with the lease the Applicant had made payments as best she could from time to time, did not deliberately fall into arrears, but did her best such that at the date of the option letter the arrears were (only) $2,630.50. Perhaps, in those circumstances, there may have been an argument that, applying the "relief against forfeiture principle" there was not in effect any arrears at the date of the option letter. 38 These sorts of questions were touched upon by His Honour Young J in Leads Plus Pty Limited v. Kowho Intercontinental Pty Limited [2000] NSWSC 459, particularly at [14-28]. His Honour made the point that even in a case where "time was essential with respect to the exercise of the option" (as in the case before him) His Honour thought that there may be some circumstances where the Courts "would be prepared to go a little further" and even "if there is a condition which is essential not only in law but essential in equity, and even though equity would not grant specific performance because of a time condition which is essential … it will do this only in exceptional circumstances … (where the) "case hinges on the existence of unconscionable conduct (at [19]). His Honour found, "tentatively" that "equity does have jurisdiction to make such an order but one must find that there is unconscionable conduct before one can exercise that discretion" (at [21]). The circumstances have to be "exceptional" and must be "connected with the existence of unconscionable conduct" and His Honour observed [24] that there "will be some cases where it will be unconscionable for a landlord to take advantage of a small mistake on behalf of a tenant to obtain a windfall". 39 His Honour asked a number of questions at [25] and, in the case before him answered the questions adversely to the lessee, even though the lessee (at [26]) did "indeed stand to lose everything by its failure" to exercise the option. His Honour observed at [28], that the "failure to exercise the option was purely a matter of the tenant failing with reasonable diligence in managing its own affairs. It was in no way the fault of the landlord nor is the landlord going to gain a windfall of any great moment at a result of what happened. Even if the facts are found in the plaintiff's (lessee's) favour the chances of the plaintiff being successful at the trial to my mind appear to be merely speculative. Furthermore, to grant an injunction will have the effect of compelling the landlord to have the plaintiff in its premises after the agreed period for the lease to come to an end, so that it will be more than merely preserving the status quo". 40 As I read this decision, what Young J is saying is that in the circumstance posited by me above at [37] the circumstances would need to be exceptional for this Tribunal to entertain an argument that somehow the relief against forfeiture principle should apply where there are arrears and where the lessee is doing her best to pay those arrears and comply with the terms of the lease. 41 The difficulty in the case now before the Tribunal is that, although the relief against forfeiture principle may apply to the arrears simpliciter, that fails to address the fact that there was no re-instatement of the bank guarantee; it also fails to address the interest payable on the arrears from time to time. In my view, and notwithstanding the assertions by the Applicant that the delays in payments and the instalments proposed arose out of "the recession – slow trade and hardship", having regard to the other matters it seems to me that the situation in which the Applicant finds herself is not the fault of the Respondent and that the breaches, when taken as a whole, are not trivial or slight and that the Respondent is in fact suffering damage as a consequence of the Applicant's continuing breaches. 42 I agree with the Respondent's submission that the leading Australian case on condition precedent to an option to renew a lease is Gilbert J McCaul (Aust) Pty Ltd v. Pitt Club Ltd (1954) 76 WM (NSW)72 at 74, where the Full Court made the following pronouncement: "In the present the lessor irrevocably offered to grant a lease. Its offer prescribed the time and manner for acceptance. Only by performing the conditions prescribed could it be accepted and result in an agreement for a lease. A purported acceptance without performance of the prescribed conditions would not and could not be an acceptance of the offer. It would in reality be a counter offer by the original offeree requiring acceptance by the original offeror if an agreement were to result. If a conditional offer is made and the offeree without performing the condition purports to accept it, that is to say makes a counter offer and that counter offer is accepted, it is a loose although not uncommon use of language to say that the original offeror has waived performance of the condition which was prescribed by his offer as being the manner of accepting it. In contemplation of law the original offeror has done no such thing. What he has done is to accept a counter-offer in the result an agreement is made but it is not an agreement consisting of the original offer and an acceptance of that offer". 43 This decision was referred to in detail in the NSW Law Reform Commission's Report 5 (1968) – Options in Leases. The Commission concluded that the "result of the judgment of the Full Court would appear to be that a breach of covenant howsoever trivial and however long before the time for exercise of the option the breach may have occurred, prevents the exercise of the option although the lessor may have waived the breach so far as concerns forfeiture of the original term". The Commission felt that such "a condition could operate harshly". The Commission referred to Conveyancing Act, 1919, s.129 (which relates to rights of re-entry or forfeiture) and proposed certain new sections (ss.133C – 133G), that would extend relief "in regard to options and like rights of renewal or purchase … but only upon application to the Court". I shall refer to these sections later in this Decision. 44 McCaul was referred to in Bowman v. Durham Holdings Pty Limited [1973] HCA 55, at [19]; but it seems to me that the observations in McCaul, unless ameliorated by statute or a subsequent decision, must stand. It is based upon the most basic of contractual assumptions, ie. that an option is a contract; its terms are those that have been agreed between the parties; and absent a countervailing equity or remedial legislation the terms of the contract must be adhered to and enforced. Thus it is necessary to consider the terms of the option clause (cl.25, above at [17]). Firstly, it is plain that the written notice was given to the Respondent within time. However, a copy was not "delivered personally to (the) management office" as was a quite specific requirement of cl.20.08 above at [16]. There is good reason for that requirement (and there was no satisfactory, or any, explanation by the Applicant of her failure to provide such a copy to the management office): by providing such a copy firstly, it avoids the problem now confronted by the parties when the letter was not received by the Respondent/lessor, and, secondly, it provides a back-up notice to the Centre Management and would create a flag so that the management, and the Respondent, would become aware of the notice of exercise of option. Both the lessor and lessee have an interest in the smooth conduct and promotion of the activities of the retail shopping centre and that is yet another reason why, I think, a copy of the notice was required to be "delivered personally to (the) management office located in the shopping centre". 45 Nextly, cl.25 makes it plain, that in order to exercise the option "the lessee shall neither at the date of such exercise of option or at the date of expiry of the Term of this Lease be in default in respect of the performance of the terms, covenants, conditions, by and on the part of the Lessee …" contained in the lease. It must follow, having regard to the findings that I have made above relating to the arrears of rent, the failure to pay interest on the arrears and, perhaps even more importantly, the failure to reinstate the bank guarantee, that the Applicant was in fact in default at all relevant times. Thus, and following McCaul, the Applicant could not have validly exercised the option. Pausing here, there seems to be an essential conflict within cl.25, where the notice, if given in time is regarded as "an exercise of option" yet, in the same breath, such "exercise of option" is not a valid exercise of option where there is default – this is probably a matter of academic semantics, because the intent is quite clear. 46 Counsel for the Respondent also referred to Bella Fruita Pty Limited v. Nyrang Holdings Pty Limited [2000] ACTSC 16. Here the appellant was a lessee of premises within a shopping centre; the lease was for a term of four years expiring 13 December 1998 and which contained an option for a further term of four years. The appellant by letter dated 11 August 1998, purported to exercise its option for a further term; and the ACT Supreme Court found that the option had not been exercised. The Supreme Court referred to the decision of the ACT Tenancy Tribunal, which relied upon McCaul and the passage quoted above, in circumstances where there was a "failure to pay rent punctually" such that the appellant had breached the contractual terms "regularly". The primary argument advanced was that the conduct of the Respondent was harsh and oppressive and the decision of the Tribunal to the contrary was an error of law. The decision primarily depended upon the terms of the ACT Commercial and Retail Leases Code of Practice, Rule 13 of which prohibits unconscionable, coercive, harsh or oppressive conduct. In the case before the Supreme Court the evidence supported the conclusions that the lessee's "breaches of the leases were not spasmodic but persistent"; that the "breaches of the lease were not accidental, but were made deliberately with full knowledge and appreciation of the requirements of the lease"; that the lessee "did not take its responsibility seriously. It consistent made no effort pay rent in a timely fashion, it could reasonably have paid on time. Its rental payments were in arrears even at the time of the hearing" (as is the case in the matter now before this Tribunal) and the lessor "was not in breach of the lease and was … entitled to pursue its own commercial interests". 47 There are some similarities between Bella Fruita and the case now before the Tribunal; but there are significant differences of fact and law such that I do not think I can put too much reliance upon Bella Fruita. However, the Respondent called it in aid (I think) of the observations of Young J in Leeds Plus. Conveyancing Act 1919 48 I have reference above [43] to the report of the Law Reform Commission. This report resulted in legislative changes whereby the Conveyancing Act 1919 was amended by the addition of s.133C – 133G. I made reference during the hearing to these sections, and the decision of Fox JM in Subway Realty v. The Investment #1 Pty Limited [2010] NSWADT 123. I was concerned that these sections may have force and effect, thus depriving the Respondent of arguing that the various defaults I have enumerated above negatived the legal effect of the option letter. 49 There is no doubt that these sections apply "any stipulation to the contrary" (s 133D(2)(a)), and apply to circumstances where there is granted to a lessee a right of renewal and the entitlement of its exercise "is made to depend upon performance by the lessee of any specified obligation, whether such performance is required before, or after, or before and after, the giving of any notice by which the option is exercised" (s.133E(1)). 50 S.133(2) makes it plain that no breach by the lessee of any agreement, covenant, condition or stipulation by which the lessee is required to do or refrain from doing anything, precludes the lessee's entitlement to the option unless: a) the prescribed notice has been served on the lessee in respect of the breach, and (b) the lessee's rights are extinguished in relation to the notice. 51 Such a notice must comply with sub-section (3) must specify "the lessee's breach of the relevant obligation" and must be served on the lessee: "(i) within fourteen days after the giving of a notice by which the option is exercised, if the breach occurred before the giving of that notice, or (ii) within fourteen days after the breach, if the breach occurred after the giving of that notice, and (iii) states that, subject to any order of the court under section 133(F), the lessor proposes to treat the breach as precluding the lessee from entitlement to the option." 52 S.133E goes on to make this provision: "(4) For the purposes of sub-section (2)(b), the lessee's rights are extinguished in relation to a prescribed notice: a) if an order for relief against the effect of the breach in relation to the lessee's entitlement to the option is not sought from the court within one month after service of the prescribed notice, or b) if proceedings in which such relief is sought are disposed of, in so far as they relate to that relief other than by granting relief, or, c) if such relief is granted on terms to be complied with by the lessee before compliance by the lessor with the order granting relief, and the lessee fails to comply with those terms within the time stipulated by the court for the purpose". 53 In order to obtain the benefit of s.133E relief may be sought under s.133F: "a) in proceedings instituted in the Court for the purpose; or b) in proceedings in the Court in which: i) the existence of an alleged breach by the lessee of the lessee's obligations under the lease; or ii) the effect of the breach from which relief is sought is in issue." 54 Pausing at this point, it is plain to me that these various sections apply as a legislative overlay to the terms of a retail lease in the same way that the Retail Leases Act itself applies, such that any provision in the lease contract to the contrary is overridden by these sections of the Conveyancing Act, and, if I am correct in my appreciation of the width/breadth of the powers given to this Tribunal as I have sought to express in Chronopoulos v Carossel Pty Ltd [2010] NSWADT 191 then at the very least this Tribunal has power to make binding declarations declaring the rights and liabilities of the parties, under law, whether any consequential relief is or could be claimed or not, pursuant to Retail Leases Act Section 72(1)(f)(iii). 55 The difficulty confronting the Tribunal is the plain fact that, although it has accepted that the option letter was sent, it was clearly not received. In addition, it was not delivered to the Centre Management office. It is plain, in my view, that the delivery to the Centre Management office is an "obligation" within s.133E(3), because it is certainly a covenant, condition or stipulation. But the difficulty is, as I see it, that although the option letter amounted to "the giving of a notice by which the option is exercised" there was no opportunity given to the Respondent to herself issue a "prescribed notice", simply because she never knew that the option letter had been sent – remembering that it has in fact been sent and was deemed to be received under cl.20.08. 56 The next problem that confronts this Tribunal is the phraseology used in s.133F. There is no doubt that the proceedings in this Tribunal have raised as an issue "the existence of an alleged breach of the lessee of the lessee's obligations under the lease, (and) the effect of the breach from which relief is sought"; but the odd thing is that the Applicant has not sought any relief under s.133E pursuant to s.133F. And, in any event, relief can only be sought in, or granted by, "the court" which, by Conveyancing Act (s.7(1)) means the "Supreme Court". 57 In any event, it seems to me from looking at s.133F(3), and having regard to the nature and extent of the breaches which I have endeavoured to enumerate above, it would seem unlikely that the Supreme Court would in fact grant relief to the Applicant. Final Observations 58 There was some evidence referred to by the Applicant relating to promotional levies. This evidence, it seems to me, is rather irrelevant having regard to the case as agitated by her. 59 Furthermore, it seems to me, and although I have considerable sympathy for the Applicant in the financial circumstances which she now finds herself, the defaults and breaches of contractual obligations, for which there have been no remedy and no persuasive material has been led that would encourage me to believe somehow or other, and in a short period of time, the Applicant could put her financial house in order and bring all her arrears/contractual obligations up-to-date (even if all of that was relevant to the granting of relief, which I think it is not), I am forced to the conclusion that the application must fail. That means that I am not satisfied that the option has been validly exercised and, consequently, the lease in fact has terminated on 30 April 2010. 60 During the course of various Directions Hearings various interlocutory orders were made with a view to preserving the status quo consistent with the principles that I sought to enunciate in Spuds Surf Chatswood Pty Limited v. PT Limited [2007] NSWADT 130 in particular at [59-69] with special reference to [60]. Having regard to the conclusions that I have formed I propose to vacate all the previous injunctions/urgent interim orders. 61 Finally, the Respondent has, as I have observed above, simply defended the current proceedings instituted by the Applicant. It will be a matter now for the parties to resolve their issues as a consequence of the dismissal of these proceedings, either by agreement, mediation or through this Tribunal. One would, of course, urge upon the parties a commonsense approach even if that results in some form of compromise. Orders 1. I vacate all injunctions and urgent interim orders made 6 May 2010, 20 May 2010 and 9 June 2010. 2. I dismiss the Application for Original Decision and the Application for Urgent Interim Orders, both filed 28 April 2010. 3. I declare that the Applicant has not exercised the option. 4. No order as to costs; save that should either party file and serve an Application for costs coupled by appropriate submissions, within 14 days, then the other party is to file and serve its reply within a further 14 days; and the Tribunal will make a decision on the papers as permitted by the Administrative Decisions Tribunal Act 1997, s.76, unless persuaded that there should be oral submissions. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.