T&F Mechanical Repairs Pty Ltd v Helou and Anor [2010] NSWSC 1266

New South Wales Supreme Court

CITATION : T&F Mechanical Repairs Pty Ltd v Helou and Anor [2010] NSWSC 1266

HEARING DATE(S) : 31 August 2010

JUDGMENT DATE : 4 November 2010

JUDGMENT OF : Schmidt J

CATCHWORDS : PROCEDURE - Supreme Court procedure - New South Wales - notice of motion seeking leave to amend summons to seek orders under s 129 of the Conveyancing Act 1919 - amendments in relation to section 133E notices - consideration of s 64 and s 65 of the Civil Procedure Act 2005 and parties' respective positions - relief sought granted - costs

LEGISLATION CITED : Civil Procedure Act 2005 Conveyancing Act 1991

CATEGORY : Procedural and other rulings

Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 258 ALR 14 CASES CITED : Greater Lithgow City Council v Wolfenden [2007] NSWCA 180 Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268 McGee v Yeomans [1977] 1 NSWLR 273

Plaintiff - T&F Mechanical Repairs Pty Ltd PARTIES : First Defendant - Samuel Michael Helou Second Defendant - Faye Helou

FILE NUMBER(S) : SC 2010/62950

COUNSEL : Mr S Johnson - Plaintiff Mr JT Svahla - Defendants

SOLICITORS : Hall Partners - Plaintiff Houston Dearn O'Conner - Defendants

- 20 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

SCHMIDT J THURSDAY, 4 NOVEMBER 2010

2010/62950 T&F MECHANICAL REPAIRS PTY LTD v HELOU AND ANOR

JUDGMENT 1 HER HONOUR: On 17 August 2010, the defendants filed a motion seeking the dismissal of the proceedings. On 30 August, the plaintiff filed a motion seeking leave to amend the summons and points of claim which had earlier been filed. At the hearing the parties' discussions resulted in a number of consent orders being made. The parties have now addressed written submissions to the amendment application. 2 The proceedings concern a lease entered by the defendants with Biondo Pty Limited, which was later transferred to the plaintiff and registered. The lease was varied in March 2006 between the plaintiff and the defendants. At issue between the parties is whether or not an option has been validly exercised, or whether the lease has been brought to an end. 3 The proceedings were commenced by summons filed on 10 March 2010. The lease was due to expire on 30 June 2010. By its summons the plaintiff sought a declaration that it had validly exercised the option for lease in January 2010, as well as an order for specific performance of the option and an order restraining re-entry. No relief was specifically sought under the Conveyancing Act 1919, even though notices under s 129(1) in respect of twenty two breaches which the defendants required to be rectified had been served by the defendants on 30 September 2009 and a notice under s 133E, in relation to sixteen identified breaches of the lease had been served on 12 February 2010. That latter notice expressly referred to the plaintiff's purported exercise of the option. 4 On 12 March 2010, a second s 133E notice was served by the plaintiff, in relation to eighteen further breaches said to have occurred after the purported exercise of the option. 5 In the points of claim document filed in April, the plaintiff referred to the first two s 133E notices. It alleged that it had not breached the lease and/or that such breaches were not material breaches and/or were breaches which the defendants had done everything reasonably possible to accommodate and in the Court's discretion, ought to be excused and/or were fabrications. It was alleged that the notices were issued in order to frustrate the plaintiff's efforts to validly exercise the option and not for any lawful reason. Declarations and orders under s 133F(2), (3) and (4) and the Court's inherent jurisdiction were sought, to have the notices set aside. Such relief had not been sought in the summons. Nor was it amended to seek such orders. 6 On 25 March and 28 May, further notices of breach were served under s 129(1). In March the defendants reserved their rights to terminate the lease in respect of the breaches. In May the defendants advised that if the breaches were not remedied, they would regard themselves as legally justified to terminate the lease. It was proposed that the plaintiff hold future rent moneys in trust, pending the outcome of the proceedings. The defendants did not wish to receive rent, as they did not want any suggestion that compliance with the breaches would be waived. On 10 June, a third s 133E notice was served in relation to two further breaches, as well as a fourth notice under s 129, with advice that if not remedied, the defendants would regard themselves as legally justified in terminating the lease on 24 June. Still the plaintiff took no steps to deal with the notices. 7 The defendants then terminated the lease. The plaintiff disputed their right to do so, taking the view that the option had been validly exercised. The parties later came to an arrangement as to how rent moneys were to be dealt with, to avoid the defendants taking possession of the premises by re-entry. 8 On 29 June 2010, the defendants filed a cross claim seeking, amongst other things, a declaration that the lease was effectively terminated on or by 29 June 2010, as well as orders that the exercise of the option was legally invalid and ineffective. 9 The plaintiff asserts that it validly exercised the option and now seeks to amend its summons, amongst other things to seek orders under s 129 of the Conveyancing Act, or the Court's inherent jurisdiction, for relief against forfeiture. Orders under s 133F, for relief in respect of the breaches by the plaintiff of its obligations under the lease, set forth in the s 133E notices, are also sought. The defendants oppose the amendment. 10 The issue to be determined depends on the exercise of discretions granted in s 64 and s 65 of the Civil Procedure Act 2005. They provide: 64 Amendment of documents generally (cf SCR Part 20, rules 1 and 4; DCR Part 17, rules 1 and 4) (1) At any stage of proceedings, the court may order: (a) that any document in the proceedings be amended, or (b) that leave be granted to a party to amend any document in the proceedings. (2) Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings. (3) An order under this section may be made even if the amendment would have the effect of adding or substituting a cause of action that has arisen after the commencement of the proceedings but, in that case, the date of commencement of the proceedings, in relation to that cause of action, is, subject to section 65, taken to be the date on which the amendment is made. (4) If there has been a mistake in the name of a party, this section applies to the person intended to be made a party as if he or she were a party. (5) This section does not apply to the amendment of a judgment, order or certificate 65 Amendment of originating process after expiry of limitation period (cf SCR Part 20, rule 4; DCR Part 17, rule 4) (1) This section applies to any proceedings commenced before the expiration of any relevant limitation period for the commencement of the proceedings. (2) At any time after the expiration of the relevant limitation period, the plaintiff in any such proceedings may, with the leave of the court under section 64 (1) (b), amend the originating process so as: (a) to enable the plaintiff to maintain the proceedings in a capacity in which he or she has, since the proceedings were commenced, become entitled to bring and maintain the proceedings, or (b) to correct a mistake in the name of a party to the proceedings, whether or not the effect of the amendment is to substitute a new party, being a mistake that, in the court's opinion, is neither misleading nor such as to cause reasonable doubt as to the identity of the person intended to be made a party, or (c) to add or substitute a new cause of action, together with a claim for relief on the new cause of action, being a new cause of action that, in the court's opinion, arises from the same (or substantially the same) facts as those giving rise to an existing cause of action and claim for relief set out in the originating process. (3) Unless the court otherwise orders, an amendment made under this section is taken to have had effect as from the date on which the proceedings were commenced. (4) This section does not limit the powers of the court under section 64. (5) This section has effect despite anything to the contrary in the Limitation Act 1969. (6) In this section, originating process, in relation to any proceedings, includes any pleading subsequently filed in the proceedings. 11 The defendants' case is that the discretions sought to be exercised are either not available to be exercised in favour of the plaintiff, or in the circumstances ought not to be exercised in its favour. The issues lying between the parties must be considered in the light of the relevant provisions of the Conveyancing Act. Sections 129, 133E, 133F and 133G provide: 129 Restrictions on and relief against forfeiture of lease (1) A right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant, condition, or agreement (express or implied) in the lease, shall not be enforceable by action or otherwise unless and until the lessor serves on the lessee a notice: (a) specifying the particular breach complained of, and (b) if the breach is capable of remedy, requiring the lessee to remedy the breach, and (c) in case the lessor claims compensation in money for the breach, requiring the lessee to pay the same, and the lessee fails within a reasonable time thereafter to remedy the breach, if it is capable of remedy, and where compensation in money is required to pay reasonable compensation to the satisfaction of the lessor for the breach. (2) Where a lessor is proceeding by action or otherwise to enforce such a right of re-entry or forfeiture, or has re-entered without action the lessee may personally bring a suit and apply to the Court for relief; and the Court, having regard to the proceedings and conduct of the parties under the foregoing provisions of this section, and to all the other circumstances, may grant or refuse relief, as it thinks fit; and in case of relief may grant the same on such terms (if any) as to costs, expenses, damages, compensation, penalty or otherwise, including the granting of an injunction to restrain any like breach in the future, as the Court in the circumstances of each case thinks fit. (2A) If such right of re-entry or forfeiture arises under a lease for a term of ten years or upwards by reason of a breach of a covenant by the lessee that the lessee will not make alterations in the demised premises without the consent of the lessor, and if it shall be proved to the satisfaction of the Court that the alterations made or proposed to be made have been or may be made without substantial injury to the lessor the Court may grant relief on such terms as the Court may think proper. (3) The provisions of subsection (1) shall not extend to a covenant or condition or agreement against doing, committing, or suffering anything whereby or by means whereof either alone or with other circumstances any licence under the Liquor Act 2007 is or may be endangered, or is or may be liable to lapse or be suspended, cancelled or refused. (4) This section applies although the proviso or stipulation under which the right of re-entry or forfeiture accrues is inserted in the lease in pursuance of the directions of any Act of Parliament. (5) For the purposes of this section a lease limited to continue as long only as the lessee abstains from committing a breach of covenant shall be and take effect as a lease to continue for any longer term for which it could subsist, but determinable by a proviso for re-entry on such a breach. (6) This section does not extend: (a) to any Crown lease or to any lease granted by an owner under section 69 of the Mining Act 1906 , or to any lease or tenancy for a term of one year or less, or (b) to a covenant, condition, or agreement against the assigning, under-letting, parting with the possession or disposing of the land leased where the breach occurred before the commencement of the Conveyancing (Amendment) Act 1930, or (c) to a condition for forfeiture on the taking in execution of the lessee's interest in any lease of: (i) agricultural or pastoral land, (ii) mines or minerals, (iii) a house used or intended to be used as licensed premises under the Liquor Act 2007, (iv) a house let as a dwelling-house, with the use of any furniture, books, works of art, or other chattels not being in the nature of fixtures, (v) any property with respect to which the personal qualifications of the tenant are of importance for the preservation of the value or character of the property, or on the ground of neighbourhood to the lessor or to any person holding under the lessor, (d) in case of a mining lease to a covenant, condition, or agreement for allowing the lessor to have access to or inspect books, accounts, records, weighing-machines, or other things, or to enter or inspect the mine or the workings thereof, (e) to a condition for forfeiture on the taking in execution of the lessee's interest in any lease (other than a lease mentioned in paragraph (c)) after the expiration of one year from the date of the taking in execution, provided the lessee's interest be not sold within such one year: But if the lessee's interest be sold within such one year this section shall extend and be applicable to such condition for forfeiture. (7) (Repealed) (8) This section shall not affect the law relating to re-entry or forfeiture or relief in case of non-payment of rent. (9) The notice mentioned in this section shall be in the form set out in the Sixth Schedule or to a similar effect. (10) This section applies to leases made either before or after the commencement of this Act, and shall have effect notwithstanding any stipulation to the contrary. 133E Breach of certain obligations not to preclude option except in certain circumstances (1) This section applies to a lease that contains: (a) an option exercisable by the lessee, and (b) provision by which the lessee's entitlement to the option is made to depend on 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. (2) Despite any provision of the kind referred to in subsection (1) (b), no breach by the lessee of any relevant obligation 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. (3) In subsection (2): breach of an obligation includes, where the obligation requires any thing to be done, any neglect or failure to do the thing concerned. obligation includes any agreement, covenant, condition or stipulation by which the lessee is required to do or refrain from doing any thing. prescribed notice means a notice in writing: (a) specifying the lessee's breach of the relevant obligation and served on the lessee: (i) within 14 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 14 days after the breach, if the breach occurred after the giving of that notice, and (b) states that, subject to any order of the court under section 133F, the lessor proposes to treat the breach as precluding the lessee from entitlement to the option. (4) For the purposes of subsection (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, otherwise 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. 133F Court may grant relief from breach of certain obligations (1) Relief referred to in section 133E may be sought: (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. (2) The court may, in proceedings in which relief referred to in section 133E is sought: (a) make such orders (including orders affecting an assignee of the reversion) as it thinks fit for the purpose of granting the relief sought, or (b) refuse to grant the relief sought. (3) The court may, in proceedings referred to in subsection (2), take into consideration: (a) the nature of the breach complained of, (b) the extent to which, at the date of the institution of the proceedings, the lessor was prejudiced by the breach, (c) the conduct of the lessor and the lessee, including conduct after the giving of the prescribed notice referred to in section 133E (2), (d) the rights of persons other than the lessor and the lessee, (e) the operation of section 133G, and (f) any other circumstances considered by the court to be relevant. (4) The court: (a) may make an order under subsection (2) on such terms as to costs, damages, compensation or penalty, or on such other terms, as the court thinks fit, and (b) may make any consequential or ancillary order it considers necessary to give effect to an order made under that subsection. 133G Lease to continue in force until issue decided (1) Except as otherwise provided by this section or by an order of the court, a lease that would otherwise expire during any of the following periods is continued in force by this subsection until the end of the period concerned: (a) a period of 14 days referred to in paragraph (a) of the definition of prescribed notice in section 133E (3), (b) a period of one month referred to in section 133E (4) (a), (c) the period commencing with the commencement of proceedings referred to in section 133E (4) (b) and ending at the time when: (i) those proceedings are disposed of in the manner referred to in that paragraph, or (ii) effect is given to orders made by the court in granting relief referred to in that paragraph, in so far as such orders affect the lessor or relate to an assurance by the lessee. (2) Paragraph (c) of subsection (1): (a) does not apply to or in respect of a lease that, but for that paragraph, would continue in force for a period longer than the period for which it is, by the operation of that paragraph, continued in force, and (b) does not, where a lessee fails to comply with terms imposed upon the lessee pursuant to paragraph (a) of subsection (4) of section 133F, operate to continue the lease in force beyond the time of that failure by the lessee. (3) Where, under subsection (1), a lease continues in force after the day on which, but for that subsection, it would expire: (a) the lease so continues in force subject to the provisions, stipulations, covenants, conditions and agreements in the lease (other than those relating to the term and the option contained in the lease) but without prejudice to any rights or remedies of the lessor or lessee in relation to the lease, and (b) the lessee, if the lease is of land under the provisions of the Real Property Act 1900 and the lessee is in possession of the demised premises, has the protection of paragraph (d) of section 42 of that Act as if the lease were a tenancy referred to in that paragraph. (4) Subject to subsection (5), where, pursuant to an option contained in a lease continued in force under subsection (1), the lease is renewed or a new lease is granted, the period during which the lease was so continued in force shall be deemed to be part of the term for which the lease was renewed or the new lease granted, and any lease granted pursuant to an exercise of the option shall be expressed to have commenced when the lease containing the option would, but for subsection (1), have expired. (5) Subsection (4) does not apply to or in respect of a lease that stipulates for the commencement of any lease granted pursuant to an exercise of the option contained therein on a day that is later than the day on which the lease so granted would, but for this subsection, commence under subsection (4). Section 129 notices 12 It is apparent that the Conveyancing Act has ameliorated the common law as to the consequences of a lessee's breaches of its obligations under a lease, particularly in so far as forfeiture for breach and the exercise of an option are concerned. 13 There is no limitation as to the time by which an application for relief under s 129(2) must be brought. Given what was at issue between the parties when the proceedings were commenced, that there was a need for relief under s 129 to be sought was made clear by the bringing of the cross claim, if the case which the plaintiff was seeking to make out by its summons, was to be preserved. 14 Thus it was that on 30 August that the plaintiff sought to amend the summons to rely on s 129. So understood, it seems to me that justice requires that this amendment be permitted. 15 By their cross claim the defendants are plainly seeking relief of the kind contemplated by s 129(2). It follows that in accordance with the provisions of s 56 of the Civil Procedure Act, the plaintiff must be permitted to amend to seek orders under s 129. That will ensure that the real questions raised by or otherwise depending on the proceedings, will be resolved in these proceedings. There is no limitation problem here and the relief sought plainly rests on 'the same (or substantially the same) facts as those giving rise to' the claims originally advanced in the parties respective pleadings, as s 65(2)(c)contemplates. 16 There is no real difficulty as to the time from which the amendment is to operate. That is a matter of discretion. As to the notices given after the commencement of the proceedings, the amendment should as a matter of logic operate only from the date of service of the notice, no cause of action existing in respect of any notice, prior to its service.