Supreme Court New South Wales Medium Neutral Citation: Elevation (NSW) Pty Ltd v The Uniting Church In Australia Property Trust (NSW) [2014] NSWSC 331 Hearing dates: 4 March 2014 Decision date: 04 March 2014 Jurisdiction: Equity Division Before: Young AJA Decision: The Plaintiff is entitled to relief against forfeiture. Catchwords: LEASES - forfeiture - re-entry by landlord - relief against forfeiture Legislation Cited: Real Property Act 1900 (NSW) Conveyancing Act 1919 (NSW) Cases Cited: 195 Crown Street Pty Limited v Hoare [1969] NSWR 193 Pioneer Quarries (Sydney) Pty Limited v Permanent Trustee Co of NSW Ltd (1970) 2 BPR 9562 Wynsix Hotels (Oxford St) Pty Limited v Toomey [2004] NSWSC 236 Batiste v Lenin [2002] NSWCA 316 Mineaplenty Pty Limited v Trek 31 Pty Limited [2006] NSWSC 1203 Category: Principal judgment Parties: Elevation (NSW) Pty Ltd (plaintiff) The Uniting Church In Australia Property Trust (NSW) (defendant) Representation: J Knackstredt (plaintiff) LAS Lawyers (plaintiff) Emil For Lawyers (defendant) File Number(s): 2014/00016564 Publication restriction: Nil Judgment 1This is an application by a tenant of commercial premises being used as a nightclub in the Kings Cross area for relief against forfeiture. The application is opposed by the landlord, the defendant. 2The parties entered into a lease in March 2013. There had been a previous lease between the parties but the landlord re-entered because of non-payment of rent and an arrangement was come to whereby the tenant entered into a new lease and paid the costs of the landlord and remedied the defaults. That was in March 2013. 3During 2013 there were a series of defaults in payment of rent, particularly, the rent was not paid on the first of the month in advance as the lease required. The rent was often paid in instalments during the month and there were some occasions where the rent would be overdue for six weeks or so. 4The landlord was, naturally enough, frustrated about this and on 15 January 2014 re-entered. The tenant applied for relief against forfeiture and Lindsay J granted interim relief on 17 January and ordered that the case proceed with expedition. That is why the final hearing has been conducted today. 5The principles of law or equity that I have to apply are quite clear. At common law, parties are entitled by contract to enter into an arrangement whereby if there is a serious breach of contract a party may put an end to the contract. 6In clause 12 of the current lease, the landlord has reserved the right to terminate the lease if rent is not paid within 14 days of being due. At law, if you have agreed to a contractual right and the other party exercises that contractual right, well, then you have no right to complain. However, for some centuries now the courts of equity have construed these contracts in different ways, that is, by asking: what was the intention of the parties when they entered into the contract? 7If the intention of the parties was that the landlord's right to re-enter and put an end to the lease was intended as security for payment of rent, then so long as the landlord receives his rent then the tenant should be relieved against the forfeiture. 8It is important to realise that when equity uses the word "forfeiture" what it means is the breach of covenant so that equity orders the parties to treat the situation as if the landlord has waived the breach. 9Now, if there has been re-entry at law, traditionally the only order that can be made is that the party enter into a new lease. If the Court is asked for relief against forfeiture before re-entry, then it orders that the forfeiture be waived. However, in more recent cases, to save everybody's expense, even if there has been re-entry, the Court usually just makes an order that the landlord should regard the forfeiture as having been waived. 10There is a little bit of a problem as to just exactly what lease the tenant has. It is a three-year lease with two options under s 53 of the Real Property Act 1900 (NSW). That lease would not have to be registered. The mere fact that there are options to renew does not affect the position. See the Court of Appeal's decision in 195 Crown Street Pty Limited v Hoare [1969] NSWR 193, in particular 207. 11However, this lease, not being registered, is not by deed and that makes its actual status a bit questionable. 12However, the parties, with my concurrence, have not put anything in support of those legalities and debated the merits. The general principle, as flows from the leading case of Pioneer Quarries (Sydney) Pty Limited v Permanent Trustee Co of NSW Ltd (1970) 2 BPR 9562 is that the power to forfeit for non-payment of rent is regarded as security for the rent, and provided the lessor and other persons concerned be put in the same position as before the forfeiture, the lessee is entitled to be relieved of the forfeiture on payment of the rent, costs and other expenses. 13However, the matter is one of the discretion of the Court and the Court when exercising its discretion takes into account the history of non-payment of rent, the question as to whether there is real doubt as to whether the tenant in the future will keep to the lease, and, in exceptional circumstances only can it consider other breaches of covenant which may have been committed even if a s 129 notice under the Conveyancing Act 1919 (NSW) has not been given and, of course, if such a notice has been given, it can consider those other breaches as well, and that follows from a large number of cases which have been cited by the lawyers for the parties, particularly Wynsix Hotels (Oxford St) Pty Limited v Toomey [2004] NSWSC 236, Batiste v Lenin [2002] NSWCA 316 and Mineaplenty Pty Limited v Trek 31 Pty Limited [2006] NSWSC 1203 at 66 and following. 14Although the extra breaches, not subject to a s 129 notice, are in evidence, and although the solicitor for the landlord says that they are significant, it does not seem to me, having heard many of these cases over many years, that they are in the worst category, which would make it proper to regard them as exceptional and so take breaches not covered by a s 129 notice into consideration. 15Accordingly, I must consider whether the past history of default in the payment of rent in accordance with the covenant of the lease and the ability of the lessee to pay the rent in the future are matters that mean, I should not exercise my discretion in granting relief against forfeiture. 16Again, the authorities to which I have referred all make it clear that the burden on the landlord in a case of non-payment of rent where rent has now been paid up-to-date and where no interests of third parties have intervened is a very heavy one as Brereton J said in the Mineaplenty case at paragraph 6, "Which normally involves demonstrating that, by reason of the conduct of the lessee or otherwise, the grant of relief against forfeiture would be inequitable." 17I was not particularly impressed with the evidence of the plaintiff as to its means. It or its associated company (it is not completely clear which) is operating a cash business in Kings Cross. 18There is some evidence, by Mr Auld its controller, in his affidavit of 26 February, that the plaintiffs business is not doing as well as he would like, but on the other hand there is payment of rental which has been made good. Currently he is paid to the end of May. There is a cash security of $269,390 against future rent, and it does seem to me that in accordance with the authorities that this is a case where I should grant relief against forfeiture. 19The question is as to what terms. It would seem to me that the security for three months should remain in some form or other. There should be an undertaking to observe the terms of the lease, and to aid that, the plaintiff should instruct its solicitor to give it a list of its obligations under the lease in simple terms and a copy of that document should be sent to the landlord's solicitor so that in future there can be no excuse that the tenant did not understand what the obligations were. 20It also goes without saying that this is the second time the default of the tenant has led to the landlord re-entering and I think there is in California a saying, "Third time loser." That will apply in equity, I would have thought, in this sort of case, if there is further default. 21I will stand the matter down for short minutes to be brought in of the formal 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: 25 March 2014