District Court New South Wales Medium Neutral Citation: Remedial Building Services Australia Pty Limited v Pony (NSW) Pty Ltd (No 2) [2013] NSWDC 132 Hearing dates: 19 February 2013 Decision date: 31 July 2013 Jurisdiction: Civil Before: P Taylor SC DCJ Decision: I do not propose to vary the orders made or make any further orders. Catchwords: LEASE - re-entry and forfeiture - contractual and common law right - orders in absence of party - power to amend Legislation Cited: Conveyancing Act 1919, s 129 Supreme Court Rules 1970, Pt 40 r 9(3) Uniform Civil Procedure Rules 2005, r 36.16 Cases Cited: DJL v The Central Authority (2000) 201 CLR 226 Marshall v Council of the Shire of Snowy River (1994) 2 BPR 14,447 Mothership Music Pty Ltd v Flo Rida (aka Tramar Dillard) [2012] NSWCA 344 Nicholson v Nicholson [1974] 2 NSWLR 59 The Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 Category: Consequential orders Parties: Remedial Building Services Australia Pty Limited ACN 077 954 459 (plaintiff) Pony (NSW) Pty Ltd ACN 143 992 296 (first defendant) David Sakker (second defendant) Representation: Ms L Walsh (plaintiff) Results Legal Solutions (plaintiff) No appearance (defendants) File Number(s): 2012/360652 Publication restriction: No Judgment 1On 19 February 2013 I gave judgment in favour of the plaintiff, Remedial Building Services Australia Pty Limited ("Remedial"), against the second defendant, David Sakker, in the sum of $55,561.35 and ordered Mr Sakker to pay Remedial's costs. 2In the course of reviewing the judgment for publication, it occurred to me that I had neglected to consider the effect of s 129 of the Conveyancing Act 1919. The matter was heard in the absence of the defendants and s 129 was not raised. This raised a question concerning the application of Uniform Civil Procedure Rule 36.16(2)(c). 3I directed the matter be re-listed before me so that the parties could make submissions on whether I could, and if I could, whether I should, amend the order I had made. 4The defendants did not appear, but Remedial appeared. I granted the parties leave to make further written submissions concerning these concerns, and in particular, on the application of Uniform Civil Procedure Rule 36.16(2)(c) and s 129 of the Conveyancing Act 1919. 5The defendants provided no submissions. Remedial submitted that r 36.16 did not authorize me to amend the orders, and further, that no amendment of the orders was justified under s 129. 6I agree with the second submission but not the first. Uniform Civil Procedure Rule 36.16 provides: "36.16 Further power to set aside or vary judgment or order (cf SCR Part 40, rule 9) (1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order. (2) The court may set aside or vary a judgment or order after it has been entered if: (a) it is a default judgment (other than a default judgment given in open court), or (b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or (c) in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order. (3) In addition to its powers under subrules (1) and (2), the court may set aside or vary any judgment or order except so far as it: (a) determines any claim for relief, or determines any question (whether of fact or law or both) arising on any claim for relief, or (b) dismisses proceedings, or dismisses proceedings so far as concerns the whole or any part of any claim for relief. (3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered. (3B) Within 14 days after a judgment or order is entered, the court may of its own motion set aside or vary the judgment or order as if the judgment or order had not been entered. (3C) Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B). (4) Nothing in this rule affects any other power of the court to set aside or vary a judgment or order". 7Remedial submitted that r 36.16(2)(b) does not empower the Court of its own motion to recall a matter to set aside or vary orders. Remedial gave three reasons. 8First, unlike r 36.16(2)(b) there was no explicit reference to the power of the Court "by its own motion". 9Secondly, the general rule that the Court has no power to set aside a final judgment that correctly reflects the Court's intended decision and that has been entered. 10Thirdly, which is really an application of the second rule, that the Court should not construe r 36.16 as granting a power in the Court to act of its own motion, in view of the general rule. 11The general rule is expressed in DJL v The Central Authority (2000) 201 CLR 226 at p 245: "Once an order disposing of a proceeding has been perfected by being drawn up as the record of a court, that proceeding apart from any specific and relevant statutory provision is at an end in that court and is in its substance, in my opinion, beyond recall by that court. It would, in my opinion, not promote the due administration of the law or the promotion of justice for a court to have a power to reinstate a proceeding of which it has finally disposed." 12This rule cannot be disputed. But it contains an exception: "apart from any specific and relevant statutory provision". Whether r 36.16(2)(b) is such a provision depends upon its proper construction. 13Rule 36.16 plainly purports to impact upon the general rule in allowing the court, in some circumstances, to interfere with a final judgment. As a result, I do not think that the general rule is significant in the proper construction of r 36.16(2)(b). 14In Nicholson v Nicholson [1974] 2 NSWLR 59, Jenkyn J considered Pt 40 r 9(3) of the Supreme Court Rules 1970, the predecessor of UCPR 36.16. Although there are differences between the terms of Pt 40 r 9(3) and r 36.16(2)(b), those differences are immaterial to the present matter. 15In Nicholson, the party that had obtained the order in the absence of the other party sought to set it aside, circumstances having changed since the order was made. Jenkyn J concluded that the power in Pt 40 r 9(3) was not confined to circumstances where the absent party was seeking an order (see pp 64-65 especially 65E). However, Jenkyn J determined that (at 66A): "The origin of this type of rule was undoubtedly based upon a desire that a court should retain a reserve of power to ensure, if possible, that injustice should not be done because of some procedural error, provided that the matter could be dealt with before the order was perfected by entry; see Evans v. Bartlam". 16His Honour also stated (at 66B): "I can find no case, and none has been referred to me, in which the power has ever been exercised where no mistake has arisen or force exerted, leading to the making of an unjust order, but where the order obtained or consented to correctly implemented the then intentions of the party, simply because one or other of the parties to the order has experienced a change of heart. In my view it does not matter whether the change of heart flowed from a reconsideration of the facts as they existed prior to the order, or because of changed circumstances which arose after the making of the order". 17Jenkyn J also said (at 67A): "It is one matter to determine whether, in an appropriate case, a person other than the absent one can resort to Pt. 40, r. 9 (3), and another to determine whether, on the facts of the particular case, the Court should accede to an application made under that rule. I do not think that, on the facts of the present case, the Court should set aside the existing order for sale simply because the plaintiff has filed a petition for dissolution of the marriage in which she is seeking, inter alia, an order for the transfer to her of the respondent's interest in the property in question. Without deciding the matter, I would be inclined to conclude that, although the words of Pt. 40, r. 9 (3) (a) are wide enough to cover applications by any interested person, and are not limited to an application by the absent party, the ground on which such application is based must ordinarily be limited to some injustice which arises from the circumstances in which the judgment was made or pronounced, and not simply to supervening circumstances which make the judgment less attractive to one of the interested parties, whether that party be the party obtaining the order or the one against whom it passed". 18In the particular circumstances of that case his Honour did not set aside the order, which in any event was not sought by the petitioner, but granted an injunction restraining the execution of the order (see also Mothership Music Pty Ltd v Flo Rida (aka Tramar Dillard) [2012] NSWCA 344 at [7] and [8]). 19It seems to me that the present case does not depend upon circumstances arising since the making of the order. If an order is warranted, it is because there was some injustice in the order at the time it was made, in that the impact of s 129 of the Conveyancing Act 1919 was not considered. In my view, if r 36.16(2)(b) is wide enough to entitle the Court to set aside an order made in the absence of a party, on the application of the party originally seeking the order, it is also wide enough to set aside an order of its own motion. There are no relevant words of limitation, and none should be implied. 20I do not think r 36.16(3B) provides any assistance. Sub-rules (3A) and (3B) pertain, relevantly, to circumstances where a contested hearing has occurred with both parties present. Those sub-rules give power to the court to set aside orders within 14 days from the date of an application, or from the date of the subsequent court order if no application has been made. 21Accordingly, in my view, if an error has been made wrongly in the absence of a party, the court retains a power of its own motion to set aside and vary it, under r 36.16. 22Whether the court should do so in the present case is another matter. Section 129 of the Conveyancing Act 1919 provides: "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". 23Remedial submits that s 129 has no application to the facts of this case, because the case did not involve a landlord seeking to enforce a "right of re-entry or forfeiture". It is true that Remedial sought only damages for breach. But I am not persuaded that the present case involved no "re-entry or forfeiture". The earlier judgment recorded Remedial's submission that "the repudiation has been accepted". Acceptance of repudiation is a means of terminating, or forfeiting, the lease. In its submissions at the earlier trial, Remedial stated: "11. A lessor is entitled to act at once on receipt of notice of the intended repudiation (Murray-Oats v Jjadd Pty Ltd [1999] 76 SASR 38 at 46, quoting Barwick CJ in Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444 at 450-1). Although in the ordinary course a plaintiff is required to show acceptance of a lessee's repudiation of a lease for an action in damages to arise (Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17), the NSW Court of Appeal has held that a taking of possession of the premises constitutes an acceptance of repudiation and therefore acceptance does not necessarily need to be formally communicated if the facts are known to the lessee (Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105 at 146 and 148). 12. In the present case, after receiving the notice of abandonment of the premises, the plaintiff accepted the first defendant's repudiation of the lease by exercising its right of re-entry pursuant to clause 28(b)(i) of the lease and confirmed that the premises had been abandoned and that all fitting and chattels had been removed. Thereafter, the plaintiff immediately took steps to have the premises re-let (see below)". 24Further, the plaintiff sought unliquidated damages for lost future rent, a claim that depended on termination of the lease. 25Thus, the case raises the question of whether a claim for damages arising from re-entry and forfeiture involves the enforcement of a right of re-entry or forfeiture. 26Remedial also contends in its recent submission that its entry and acceptance of repudiation was "consistent with a common law right to terminate for repudiation". This submission raises, albeit obliquely, the application of s 129 to circumstances where the right of re-entry or forfeiture was not "under any proviso or stipulation" in the lease. 27In Marshall v Council of the Shire of Snowy River (1994) 2 BPR 14,447, Meagher JA, agreed to by Powell JA, stated (at p 14,457): "An examination of the decision of the High Court of Australia in The Progressive Mailing House Pty Ltd v Tabali (1985) 157 CLR 17, particularly per Deane J at 55, demonstrates that, a lease being a contract, when one party to it repudiates it or commits a fundamental breach or a breach of one of its essential terms, the other party may 'accept' the repudiation or breach and terminate the lease. In such a case the lessor, presuming him (as in the present case) to be the innocent party, will have two rights: first, a contractual right to terminate the lease by re-entry for breach of covenant (in this case contained in cl 4 of the lease), and secondly on the application of the ordinary principles of contract law to terminate for breach. If he relies on the former right, he must comply with s 129 of the Conveyancing Act before re-entering; if, as here, he relies on the latter right, s 129 becomes an irrelevance". 28Deane J in The Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at pp 55-56 stated: "It follows from the foregoing that, in the circumstances which had arisen, the landlord had both a contractual right to terminate the lease by re-entry under cl. 10.1 for breach of covenant and, on the application of the ordinary principles of contract law, a common law right to terminate for fundamental breach. The landlord was not obliged to elect between the two grounds for terminating the lease: it was entitled to rely upon them both. A party entitled to terminate a contract for repudiation or fundamental breach may rely upon both a specific contractual right to terminate the contract and the common law right to terminate unless, as a matter of construction, the former excludes the latter: see, e.g., Rawson v. Hobbs (44); Shepherd v. Felt and Textiles of Australia Ltd. (45) and, generally, the cases referred to in Carter, Breach of Contract (1984), pars. 914, 1006. More specifically, where a contractual right to terminate for past breach and the common law right to terminate for repudiation or fundamental breach exist concurrently, the reliance upon the contract involved in the exercise of the contractual right to terminate will not preclude the recovery of damages for loss of the future benefit of the contract by reason of repudiation or fundamental breach unless the contract expressly or impliedly so provides: cf. Yeoman Credit Ltd. v. Waragowski (46). Clause 10.1 of the memorandum of lease in the present case did not preclude the common law right to sue for fundamental breach. To the contrary, it expressly provided that the landlord's exercise of the right of re-entry thereunder would be 'without prejudice to any claim which the Lessor may have against the Lessee in respect of any breach of the covenants and provisions in this Lease on the part of the Lessee to be observed or performed'. That being so, the exercise by the landlord of the right of re-entry under cl. 10.1 did not deprive it of the right to claim damages for the loss of the future benefit of the tenant's covenant to pay rent which it sustained by reason of the tenant's fundamental breach of the provisions of the lease." 29In these circumstances, Pony committed a breach of an essential term, and the plaintiff had a common law right to terminate the contract and recover damages, including for the loss of the future benefit of the contract. Remedial exercised that right. Whether its express right under the contract involved the enforcement of a right of re-entry or forfeiture, and thus was exercisable only after a s 129 Notice, therefore does not need to be resolved. 30Accordingly, I do not propose to vary the orders made or make any further orders. ********** 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. Decision last updated: 08 August 2013