Home Ideas Centre Sydney Pty Ltd v Alem Pty Ltd [2010] NSWSC 695

New South Wales Supreme Court

CITATION : Home Ideas Centre Sydney Pty Ltd v Alem Pty Ltd [2010] NSWSC 695

HEARING DATE(S) : 11 June 2010

JUDGMENT DATE : 1 June 2010

JURISDICTION : Equity Division

JUDGMENT OF : Palmer J

DECISION : Relief against forfeiture granted on terms; plaintiff to pay defendant's costs on indemnity basis.

CATCHWORDS : LEASES – CONSTRUCTION – RELIEF AGAINST FORFEITURE – COSTS – Whether demand for rent and outgoings given so as to justify termination – whether, despite long history of default by lessee, relief against forfeiture should be granted – whether lessee should pay lessor's costs on indemnity basis.

CATEGORY : Principal judgment

- Direct Food Supplies (Vic) Pty Ltd v DLV Pty Ltd [1975] VR 358 CASES CITED : - Tannous v Cipolla Bros Holdings Pty Ltd [2001] NSWSC 236 - Wilkinson v S & S Gikas Pty Ltd [2006] NSWSC 1314 - Woodgate v Garard Pty Ltd [2010] NSWSC 508

PARTIES : Home Ideas Centre Sydney Pty Ltd (Plaintiff) Alem Pty Ltd (Defendant)

FILE NUMBER(S) : SC 2010/136320

COUNSEL : J.C. Giles (Plaintiff) J.B. Simpkins SC, D.C. Price (Defendant)

SOLICITORS : Kosmin & Associates (Plaintiff) Harris Freidman Hyde Page (Defendant)

2010/136320 Home Ideas Centre Sydney Pty Ltd v Alem Pty Ltd

JUDGMENT

1 July, 2010

Introduction

1 The Plaintiff was the lessee of commercial premises in O'Riordan Street, Alexandria. The Defendant was the lessor. The lease was for a term of ten years, expiring in 2016. 2 On 31 May 2010, the Defendant purported to terminate the lease for failure to pay rent and outgoings and re-entered the premises. On 1 June, the Plaintiff commenced these proceedings, seeking a declaration that the termination of the lease was invalid and, in the alternative, relief against forfeiture. 3 On 2 June, by consent, the Defendant gave an undertaking to allow the Plaintiff to remain in possession, upon certain terms. The proceedings were expedited and came on for final hearing on 11 June. At the conclusion of submissions, I informed the parties that I had concluded that the termination of the lease was valid but that the Plaintiff should have relief against forfeiture, if it were able to comply with certain conditions by 16 June. 4 The matter was re-listed on 16 June. The parties informed me that they had agreed upon undertakings which should be given and the orders which should be made. I made orders in accordance with the agreed Short Minutes and informed the parties that I would give my reasons for my conclusions. These are those reasons. The facts 5 Soon after the commencement of the lease, the Plaintiff fell into arrears in the payment of rent and outgoings. From February 2007 onwards a succession of e-mails from the Plaintiff's managing director, Mr Lowery, to the Defendant sought a reduction in rent on the basis that the Plaintiff was suffering from difficult financial conditions. The amount of rent and outgoings in arrears kept increasing over this time. 6 By June 2007, Mr Lowery was suggesting that the Plaintiff would go 'belly up' if a rent reduction were not given. On 8 December 2008, Mr Lowery wrote asking for a 25% reduction in the rent, saying that without the reduction the Plaintiff would have to go into receivership. Mr Lowery kept up a continual stream of such e-mails through January and February 2009, each painting a bleaker picture of the Plaintiff's prospects and begging desperately for a rent reduction. 7 By letter dated 25 March 2009, the Defendant agreed to reduce the rent by $240,000 for a period of twelve months, i.e. a reduction of $20,000 per month, and to apply that amount towards the reduction of the outgoings for which the Plaintiff was liable under the lease. The reduction was by way of loan until the end of the lease provided that the loan would be written off at that time if the Plaintiff had met all its obligations under the lease. 8 The Plaintiff accepted the rent reduction but soon fell into arrears again. Mr Lowery continued to write to the Defendant, piteously begging for a further reduction and strongly suggesting that the Plaintiff was tottering on the verge of liquidation and would collapse if future rent indulgences were not given. 9 By 21 May 2010, the Defendant had lost patience with the Plaintiff's defaults in payment of rent and outgoings. It invoiced the Plaintiff for its proportion of outgoings for the ten months up to and including April 2010 – an amount of $166,048.08. The Plaintiff failed to pay. On 31 May, the Defendant terminated the lease and re-entered the premises. At that time the Plaintiff owed: