Australian International Academy of Education Limited v Dr Nirmal Taluja & Ors [2011] NSWSC 647 | Case summary

Factual Background 4Dr Taluja acquired the property at Strathfield on 15 December 1993 following a mortgagee sale. The property consists of land of approximately 12,700 square metres spread over two titles. Constructed on the land are three heritage buildings:

A 3 storey 40 room brick building which was a former Methodist bible college known as "Leigh Hall";
A small free standing building capable of seating about 30 persons which was part of the original Methodist bible college facilities and which is known as "Vickery Chapel";
A double storey 9 room colonial style building known as "Brundah House" with an attached single storey building known as "the Annex" and one detached single storey building known as "the Summer House". Also on the site are caretakers quarters. 5From the time that Dr Taluja purchased the property, she says that she, together with her husband and two children, resided in Brundah House, principally on the second level. In addition, Dr Taluja used rooms 15, 16 and 17 of Leigh Hall as a medical centre. Those rooms had a separate entrance and could be shut off from the rest of the building. The balance of Leigh Hall was, at the time, leased to a company by the name of The Australian Centre of Languages, although that lease came to an end in 1998 or 1999 and, from that time, it appears that Dr Taluja ran her own language school at Leigh Hall. 6In addition, since 1998 or 1999, Vickery Chapel has been used by the third defendant, Shree Shirdi Sai Sansthan Sydney Ltd ( Shree Shirdi ) as a place for prayers and community activities for the Sydney Hindu community. On or about 18 September 2007, Shree Shirdi lodged a caveat over the property claiming an interest as lessee. However, no details of the lease are given in the caveat. Shree Shirdi did not take an active role in these proceedings, although I was informed that it was aware of them. After the conclusion of the hearing I raised the question whether the court could make any orders that affected Shree Shirdi when no relief was sought against it and it had not participated in the hearing. The matter was re-listed before me to give the parties an opportunity to make further submissions on that point. At that time, Mr Einstein appeared for Shree Shirdi, Shree Shirdi filed a submitting appearance and I was informed that an agreement had been reached between AIAE and Shree Shirdi the effect of which was that, in granting any relief sought by AIAE, it was unnecessary to make any orders against Shree Shirdi. I have proceeded on that basis. 7Prior to January 2003, Noor Al Houda operated the Noor Al Houda Islamic College at premises at Condell Park. It had started as a small girls school, but by 2000 it taught both girls and boys at primary and secondary level and had approximately 720 students. Its principal was Ms Silma Ihram. The school needed to find new premises when it was discovered that the site on which it operated was contaminated. In November or December 2002, Mr Baheej Adada, Ms Ihram's husband, approached Dr Taluja about obtaining temporary accommodation at the Strathfield premises. Dr Taluja agreed and, in late December, the parties executed a lease. The term of the lease was 6 months commencing on 15 January 2003 with a 6 month option. The leased premises were described as: Leigh Hall College (excluding rooms 15, 16 and 17, the Chapel and the toilet facilities) and the land so marked "exclusive playground" in the attached Site Plan and located at 420 Liverpool Street, Strathfield. The reference to Liverpool "Street" is obviously an error. It should be a reference to Liverpool Road. The rent payable under the lease was $19,500 per month. 8After the lease was signed, there were discussions between Ms Ihram, Mr Adada and Dr Taluja concerning a longer lease and an extension of the lease to cover Brundah House. Mr Mick Isakka, a friend of Dr Taluja's, also participated in some of those discussions. The buildings were dilapidated and one of the matters that was discussed was the possibility of Noor Al Houda obtaining government funding to do them up. Ms Ihram and Mr Adada said that they would need a lease of at least 25 years to obtain that funding. Mr Adada says that there was also a discussion concerning the size of the rooms in Leigh Hall during which Mr Isakka suggested in Dr Taluja's presence that there would be no problem in removing walls. Ms Ihram gives a slightly different version of this conversation. According to her, it was Dr Taluja who suggested that the rooms could be combined. In addition, there was discussion about the possibility of Dr Taluja redeveloping part of the site. Mr Adada says that, on that issue, he said that that was something that they could talk about but that the college must come first. 9Dr Taluja gives a different account of the conversations concerning a new lease. She says that in early March 2003 she had a discussion with Mr Adada to the following effect: Dr Taluja: As long as you co-operate with my development of the land next to Leigh Hall, Noor Al Houda can continue at the premises. I will live only in the middle apartment of Brundah and I will still run the medical practice in rooms 15, 16 and 17 of Leigh Hall. I also want to be able to use the function hall and kitchen in Brundah when I need to. The rent will have to increase by $3,000 per week because of your use of Brundah. Mr Adada: The Board of Education will not approve of you living in Brundah if we are conducting the school in that building. We cannot include that in the lease. We will have to enter a side agreement. Dr Taluja: Ok. The side agreement will have to provide that if ever I decide to move out of the middle apartment, that rent will increase by $500 per week. Mr Adada: The rent for Brundah is too high. We are spending some money to fix it. Also if you want to use the function hall and kitchen in Brundah it must be outside of school hours. Dr Taluja: Ok, the rent for Brundah will increase by $2,000 per week for the first six months and then it will increase by $3,000 per week after that. I agree that I can only use Brundah function hall and kitchen outside of school hours. Mr Adada: Ok. I agree. ... 10At about this time, on 7 March 2003, the parties executed a "heads of agreement for 25 year lease" which contained the following terms:
the lease amount to be $20,000 per month plus GST for the first 5 years with annual CPI increases to be negotiated with all future rental to be negotiated
the doctor's surgery to be located adequately on the premises
the use of both Leigh Hall and Brundah House (all existing buildings excepting the chapel building) to be negotiated at a later date, the existing lease to continue until that date
... 11For reasons that are not entirely clear but which were connected to government funding, negotiation of the new lease became pressing and Dr Taluja approached Mr John Orford, solicitor, on 14 March 2003 to prepare that lease on an urgent basis. Dr Taluja says that she obtained Mr Orford's contact details from Mr Adada, although that seems unlikely since Mr Orford gave evidence that he did not know Ms Ihram or Mr Adada. Nothing, however, turns on the resolution of this issue. Dr Taluja says that she had a conversation with Mr Orford in which she gave the following instructions among others:
The lease would be for Leigh Hall and Brundah House except for the middle apartment in Brundah House;
The rent would increase by $2,000 per week to reflect the use of Brundah House and would increase a further $1,000 per week after 6 months;
If Dr Taluja decided to leave the middle apartment in Brundah House, the rent would increase by $500 per week;
The third defendant would continue to use the temple;
Dr Taluja's surgery would remain in Leigh Hall and she would continue to be able to use the Brundah function hall outside of school hours;
The lease would recognise Dr Taluja's right to continue with the proposed development next to Leigh Hall. Dr Taluja does not suggest that she referred to her use of rooms 15, 16 and 17 of Leigh Hall as a medical centre in this conversation. 12The lease was signed on 18 March 2003. There is a dispute about the circumstances in which that occurred. 13Ms Ihram and Mr Adada say that they met Dr Taluja at Mr Orford's office. There were further negotiations concerning the terms of the lease over several hours. During the course of those negotiations one issue raised by Dr Taluja was whether she would be entitled to keep the flat in Brundah House. In response, Mr Adada said words to the effect of: You cannot live in the middle of a school campus. It just would not work. There are child protection issues about who can come and go from School Grounds. We cannot agree. The Department would not allow it. We need the whole building. Mr Adada and Ms Ihram did, however, agree that Dr Taluja could store some of her belongings temporarily in a room in Brundah House. 14Following further discussions, during the course of which Mr Orford amended the terms of the lease, Mr Orford requested the parties to sign each page of the document. It appears that the parties signed two copies. 15Dr Taluja gives a quite different account of how she came to sign the lease. Originally, according to her, Mr Orford presented her with a copy of the document which had already been signed by Mr Adada and Ms Ihram. After reading the document, Dr Taluja told Mr Orford that it did not have the terms in it that she had requested. She then says a conversation occurred in words to the following effect: Mr Orford: They are in a hurry to sign this, otherwise they will miss out on government funding. Dr Taluja: I will sign the back page only. You keep the back page and fix the lease with all the terms that I want in it and put the signed page on the lease to show my agreement. In one of two later affidavits sworn on the first day of the hearing (20 June 2011), Dr Taluja gave a different account of the meeting on 18 March 2003. She appears to accept that she signed each page of the lease, which she describes as a "work in progress". She also accepts that she met with Mr Adada and Ms Ihram and says that she gave them a copy of the signed document and said words to the effect of: I am giving you this agreement so you can get your application made for a government grant. We still have to finish the side agreement and my right to do other developments behind Leigh Hall. This should be enough for your government grant application. In that affidavit, Dr Taluja reiterates that what was intended was that she would be paid initially an additional $2,000 per week plus GST for Brundah House and that was one of the matters to be dealt with in the side agreement. However, in a third affidavit also sworn on 20 June 2011, Dr Taluja says that the side agreement was to cover three matters. They were the question of redevelopment, the use of rooms 15, 16 and 17 of Leigh Hall as her surgery and the use of the flat in Brundah House. 16Item 1 of the reference schedule to the lease describes the land the subject of the lease as: Part of the land comprised in Folio Identifier 100/774567 together with part of the land comprised in Folio Identifier 4/773523. The premises are described in Item 5 as: 416-420 Liverpool Street [sic], Strathfield South. Including All existing buildings (excluding the Chapel) and the land. 17The lease is expressed to be for a term of 25 years commencing on 15 July 2003, with an option for 5 years. 18Item 7 of the reference schedule sets out the rent payable under the lease in these terms: MONTHLY RENT: Initial monthly rental of ($20,000) dollars [sic] per month to be increased to $20,500.00 per month after six (6) calendar months, and further increased to $21,000 after twelve (12) calendar months for a further period of six (6) months and thereafter to be renewed pursuant to Item 8, eighteen (18) months after the commencement date of this Lease. Item 8 of the reference schedule provided for the rent to increase annually by 5 percent. In addition, Item 14 of the reference schedule and cl 6 of the lease provides for a market rent review every 5 years. Item 12 of the reference schedule provided for the payment of a bond of $100,000. 19Clause 2.7 of the lease provides: The Lessor and the Lessee agree that the terms contained in this Lease cover and comprise the whole of the agreement between the Lessor and the Lessee and declare that no further terms whether in respect of the Premises or otherwise shall be implied or arise between the Lessor and the Lessee by way of collateral or other agreement made by or on behalf of the Lessor and the Lessee on or prior to the execution of this Lease and any implication or collateral or other agreement is negatived. 20Clause 8.1 of the lease states that the lessee must use the premises for the purposes set out in Item 9 of the reference schedule. Item 9 states that the permitted use is as a school and educational premises. 21Clause 11.2 provides: The Lessee will not without the previous consent in writing of the Lessor (which consent may be withheld by the Lessor in its absolute discretion) make any alteration or addition in or to the Premises or any part thereof and shall in the course of such alterations or additions made with the consent of the Lessor observe and comply with the requirements of the Lessor and all relevant authorities. 22Clause 16 deals with sub-letting and assignment. Clause 16.1 provides that the Lessee "shall not without the written consent of the Lessor sublet part with or share the possession of ... the Premises". The clause goes on to provide that the lessor must not unreasonably withhold its consent to any proposed sublease subject to a number of conditions relating to the way in which the request for consent is to be made. However, cl 16.1.A provides: The Lessee shall be entitled to Sublease the Leased premises without consent if the proposed Sublease relates to the permitted use. Clause 16.2 provides: The Lessee must not assign this Lease without first obtaining the prior written consent of the Lessor. The Lessor is entitled to withhold consent to the assignment of this Lease in any of the following circumstances (and is not entitled to withhold that consent in any other circumstances): 16.2.1 if the proposed assignee proposes to change the use to which the Premises are put; or 16.2.2 if the proposed assignee has financial resources or business skills that are inferior to those of the proposed assignor; or 16.2.3 if the Lessee has not complied with Clause 16.3; 16.2.A the Lessee shall be entitled to Assign this Lease to relate [sic] parties without consent. Clause 16.3 provides that a request to assign the lease must be made in writing and must be supported by such information as the lessor may reasonably require "concerning the financial standing and business experience of the proposed assignee". Clause 16.3.4 provides that the lessor must deal with any request for consent expeditiously and is to be taken to have consented to the assignment if the lessee has complied with its obligations relating to the request and the lessor has not responded within 30 days. 23Clause 17 provides that it is an event of default under the lease if, among other things, any moneys payable under it are unpaid for 14 days after their due date (cls 17.1.1 and 17.1.2), if the lessee "ceases or threatens to cease to carry on its business or does not carry on its business in accordance with the Permitted Use" (cl 17.1.5) or if the lessee is placed under administration (cl 17.1.8). If there has been an event of default, the lessor may, after giving notice, terminate the lease. 24Clause 20.6 requires the lessee to pay the costs and disbursements relating to the preparation, completion, stamping and registration of the lease. 25The memorandum of lease also contained the following further special conditions: 24.1 ... 24.2 The lessee acknowledges that they will have to provide and make available to those members of the public visiting the Chapel, toilet and kitchen facilities located in close proximity to the Chapel. 24.3 The Lessor agrees to allow the Lessee to secure Leigh Hall College by way of lockable doors, under the control of the Lessee, separating the Doctors Surgery. ... 24.14 The parties agree that the Lessor shall be entitled to have access to the function hall located within the Brundah House outside the Lessee usual school hours provided the Lessor has given the Lessee at least 7 days prior written notice. 24.15 Notwithstanding the provisions of the Lease, the parties agree that the Lessor shall be entitled exclusive access and use of the Doctors Surgery within Leigh Hall College comprising Rooms 15,16 and 17 and the toilet facilities. 26I do not accept Dr Taluja's account of the circumstances relating to the execution of the lease. Rather, I accept the account given by Mr Adada and Ms Ihram. I say that for a number of reasons. 27First, I do not regard Dr Taluja as a satisfactory witness. In her affidavits, she gives inconsistent accounts of what happened at the meeting on 18 March 2003. In her first affidavit, she says that she only signed the back page of the lease (which was patently wrong) and that she instructed Mr Orford to prepare an amended document to reflect the instructions that she had given him. In her later affidavits, she accepts that she signed all the pages of the lease but says that there was to be a side agreement, although she gives different evidence of what that side agreement was to contain. Originally, she suggested that the purpose of the side agreement was to avoid having to include in the lease a reference to the fact that she would continue to occupy the flat in Brundah House. However, her later affidavits do not give any coherent account of why some things were and some things were not to be included in a side agreement. To take one example, Dr Taluja says in one of her affidavits sworn on 20 June 2011 that the agreement in relation in rooms 15, 16 and 17 of Leigh Hall were to be contained in the side agreement, yet they are set out in cl 24.15 of the lease. 28Dr Taluja's evidence in the witness box was no better. She was emotional and frequently gave non-responsive answers. A substantial part of her evidence was given in the form of speeches seeking to explain why her account of events was correct. On occasions, she clearly tailored her evidence to suit her case. Perhaps the most striking example of this was her evidence concerning a letter dated 19 February 2010 sent by Sanford Legal, her solicitors, saying that they had received instructions to refer "the matter" to the President of the Australian Property Institute for determination of the market rent under the lease. Dr Taluja clearly appreciated that this letter was relevant to the question whether she had elected to affirm the lease. At first, she tried to avoid answering the question whether the letter was sent on her instructions. Ultimately, she appeared to concede that the letter was but said that it was "without prejudice". On the other hand, both Mr Adada and Ms Ihram gave frank answers to the questions asked of them and willingly made concessions where it was appropriate for them to do so. 29Secondly, Dr Taluja's evidence is not supported by the evidence given by Mr Orford. Mr Orford gave evidence that the lease that was signed by the parties reflected the instructions that he had been given. He said that he received multiple instructions for Dr Taluja during the course of the meeting on 18 March 2003 and that Mr Adada and Ms Ihram were in the same room when those instructions were given. He says that he recalls some reference to a "side agreement". However, his evidence in that regard goes no further than saying that there was a reference to the possibility of Dr Taluja wanting to redevelop part of the site and Mr Adada or Ms Ihram replying that that could be the subject of further negotiation and dealt with in a further agreement subsequently. Importantly, Mr Orford gave evidence that he went to some trouble to draft a clause dealing with a possible redevelopment and that clause was rejected by Mr Adada and Ms Ihram. The fact that they did so is inconsistent with the suggestion that the parties had reached agreement on that issue at that time. 30Third, implicit in Dr Taluja's account of what happened is the contention that there would be no binding lease until the terms sought by Dr Taluja had been incorporated in it or in a side agreement. On the other hand, Dr Taluja appreciated that the document she signed was to be used by Noor Al Houda to obtain government funding. Moreover, Dr Taluja used the document she had signed to obtain a valuation of the property for the purposes of refinancing her mortgage. On both counts, if the lease was not intended to be enforceable according to its terms, that would have involved Dr Taluja participating in a fraud and the document she signed amounting to a sham. The court should not lightly infer that that was Dr Taluja's intention; and Mr Raphael, who appeared for Dr Taluja, disavowed that it was. Indeed, it was Mr Raphael's case that the parties had actually agreed on the terms sought by Dr Taluja on or before 18 March 2003 and that that agreement either formed a collateral contract or was the basis of a claim for rectification of the lease. In final submissions, Mr Raphael confined himself to the latter proposition. Whatever might be said about those claims, they are inconsistent with Dr Taluja's accounts of the meeting. 31Fourth, Dr Taluja's accounts of the meeting are implausible. There are very good reasons why Mr Adada and Ms Ihram could not agree to Dr Taluja continuing to occupy the flat in Brundah House; and there is no reason to think that they would not do everything necessary to comply with their obligations in connection with running the school. I accept their evidence that Dr Taluja only used the flat occasionally. Consequently, it is not surprising that she would be prepared to give up that use in order to reach agreement on the lease. The lease was obviously important to her in order to make an application to refinance her mortgage. Dr Taluja maintained, particularly in her oral evidence, that she would not have agreed to a rent of $20,000 per month for both Leigh Hall and Brundah House when Noor Al Houda had been paying rent of $19,500 per month for Leigh Hall alone. I do not accept that contention. The buildings were in a dilapidated condition. It was contemplated that Noor Al Houda would spend significant sums of money renovating them. The lease provided for rent increases after 6 and 12 months, plus increases of 5 percent per annum 6 months after that, together with a market rent review after 5 years. It seems implausible in those circumstances that Mr Adada and Ms Ihram would have agreed to pay additional rent on top of that and, if they had, it is quite unclear why that additional rent needed to be dealt with in a side agreement as Dr Taluja asserts on at least one version she gives of the meeting on 18 March 2003. 32Fifth, the existence of a side agreement is inconsistent with cl 2.7 of the lease (quoted above). 33After the lease was signed, one copy was taken away from Mr Orford's office by Ms Ihram. That copy was signed at the bottom of each page by Dr Taluja, Mr Adada and Ms Ihram. However, it is missing the first two pages in the form required for registration. The other copy has been lost in circumstances which I will describe shortly. The likelihood is that that copy included the front two pages in the form required for registration. A draft prepared by Mr Orford contained those two pages. The lease was lodged for registration and, although, as I will explain, the lease was not registered, there is no evidence that a requisition was made to the effect that the document was missing the first two pages. 34The copy of the lease that was taken away from the meeting on 18 March 2003 by Ms Ihram was stamped on 11 April 2003. No stamp duty was payable. It may be inferred that Noor Al Houda was entitled to an exemption under s 275 of Duties Act 1997 on the basis that it was an "exempt charitable or benevolent body" within the meaning of that section. 35A number of things then happened which are relevant to the current dispute. 36First, Noor Al Houda engaged Mr Bobi Damcevski, solicitor, to arrange to have the lease registered. Precisely what happened next is unclear. It appears that the version of the lease that was either kept by Mr Orford or delivered to Dr Taluja on 18 March 2003 was lodged for registration and that arrangements were made for the Commonwealth Bank, which held the certificates of title over the land as mortgagee, to produce the certificates to permit registration of the lease. Dr Taluja says that she did not agree to any of that happening because, as far as she was concerned, the lease was not to take effect until the terms were amended or a side agreement signed. In any event, following lodgement of the lease, the Department of Lands raised a requisition dated 25 August 2003 because the lease was expressed to be a lease of part only of two lots. I say more about this issue later. It appears that the lease was then uplifted and came into the possession of the Commonwealth Bank, which lost it. In the meantime, Noor Al Houda attempted, without success, to persuade Dr Taluja to satisfy the requisition by lodging a plan of sub-division. On 2 December 2003, Mr Damcevski advised Noor Al Houda to lodge a caveat to protect its interest, which is what it did. 37Second, Noor Al Houda commenced to renovate the buildings it occupied. As part of those renovations, it removed a number of walls in Leigh Hall in order to make larger classrooms. Ms Ihram estimates that, in total, Noor Al Houda spent in excess of $300,000 on the renovations. 38Third, following the discovery of contamination at the Condell Park grounds, student numbers at the Noor Al Houda Islamic College had dropped dramatically. In addition, Noor Al Houda commenced court proceedings in connection with the contamination. Although Noor Al Houda was ultimately successful in those court proceedings, the combination of the loss of students, the court proceedings and the move caused Noor Al Houda severe financial difficulties, which resulted in it being placed in administration on 18 July 2003. Dr Taluja learned of that fact from the administrator. Noor Al Houda entered into a Deed of Company Arrangement on 8 September 2003. 39Fourth, Ms Ihram says that in late 2003 Dr Taluja asked if Noor Al Houda wanted to take over the rooms occupied by the medical practice for an extra $500 per week. According to Ms Ihram, Dr Taluja said that she required the additional rent to satisfy the Commonwealth Bank and that she did not need the rooms because she would be spending a lot of time in Queensland. Dr Taluja disputes that evidence. According to her, she was locked out of her rooms. She concedes that when she discovered that that had happened she became hysterical and confronted Ms Ihram, insisting that she wanted access to her rooms and to the flat in Brundah House. During the course of the altercation, Dr Taluja struck Ms Ihram (accidentally, according to Dr Taluja). The police were called and, subsequently, an apprehended violence order was made against Dr Taluja. Again, I prefer Ms Ihram's account of these events. For the reasons I have given, I did not find Dr Taluja to be a satisfactory witness. Noor Al Houda prepared and signed an agreement providing for the payment of additional rent and for Dr Taluja to vacate rooms 15, 16 and 17 and the temporary storage space she had in Brundah House. A copy of that agreement was faxed to the Commonwealth Bank on 16 December 2003. Noor Al Houda commenced paying the additional $500 per week from that time and Dr Taluja accepted the additional rent, although she never signed the agreement. Those events are consistent with the evidence given by Ms Ihram. 40Fifth, in about March 2004, Noor Al Houda realised that Dr Taluja had not provided tax invoices showing her ABN and that consequently it was obliged to deduct withholding tax from its rent payments. It started doing so, which was a source of complaint by Dr Taluja. The issue was eventually resolved and Noor Al Houda resumed paying the full amount of the rent. However, the deductions made by Noor Al Houda remained an issue for Dr Taluja and, on a number of occasions during the following years, Dr Taluja complained that Noor Al Houda was in arrears in paying rent. 41Sixth, as a result of the matters I have referred to, there was a deterioration in the relationship between Ms Ihram and Mr Adada on the one hand and Dr Taluja on the other. On a number of occasions, Dr Taluja served or instructed her solicitors to serve what purported to be eviction notices or notices terminating the lease. In addition, Dr Taluja refused to sign a development application to be lodged by Noor Al Houda to permit it to continue to operate the school at the Strathfield site. Noor Al Houda commenced proceedings in this court for an order requiring Dr Taluja to do so. Those proceedings were settled on the basis that Dr Taluja would sign the development application and Noor Al Houda would permit Dr Taluja to re-establish her medical practice in rooms 15, 16 and 17 of Leigh Hall. Dr Taluja says that she was unrepresented at the time that she signed the agreement and did so under duress. There is no merit in this allegation. Having signed the lease which required the premises to be used as a school, Dr Taluja was clearly obliged to sign a development application to permit that to happen. 42In about August 2004, Ms Ihram and Mr Adada established the plaintiff, a public company limited by guarantee, which was then named Noor Al Houda Islamic College (Holdings) Limited ( Holdings ). Both of them became directors of that company. The company was established in order to comply with conditions relating to obtaining Commonwealth government grants. The operations of the school were gradually taken over by Holdings. However, Noor Al Houda continued to pay rent to Dr Taluja. No formal steps were taken to assign the lease to Holdings and it appears that Dr Taluja was not notified of the change. 43By early June 2006, the financial position of Holdings had become desperate. Ms Ihram and Mr Adada approached the trustees of the Islamic Trust Foundation of Victoria, who ran similar schools in Melbourne and Abu Dhabi, for assistance. The trustees agreed to take over the running of the school in Strathfield and agreed to provide funding through a loan agreement. On 16 June 2006, the trustees replaced the existing directors of Holdings and, on 15 January 2007, that company changed its name to its current name. From the time that the trustees became directors of Holdings, Holdings paid rent directly to Dr Taluja. It is convenient to refer to the plaintiff as "Holdings" in respect of events that occurred before the trustees became directors of that company and to refer to it as "AIAE" after that time. Ms Ihram continued at the school for a time after the trustees were appointed to the board of AIAE. She was replaced at the end of 2006, although she continued on as a consultant. Other staff were also appointed to the school. Dr Taluja was aware of these changes. She says that sometime in June or July 2006 she was informed by someone who introduced herself as the new principal that AIAE had taken over operation of the school. 44The money payable under the loan agreement was payable in two tranches. The first tranche was to meet the immediate needs of the school. The second tranche, which was to repay old debts of the company including amounts owed to Ms Ihram and Mr Adada, was only payable if Strathfield Council gave its approval to the Development Application that had been lodged to permit the college to operate as a primary and secondary school with a population of not less than 440 students, or if that approval was given by the Land & Environment Court. In fact, the Council refused approval to the school but, on 15 February 2007, the Land and Environment Court upheld an appeal against the Council's decision. Following that decision, AIAE agreed to take an assignment of Noor Al Houda's rights under the lease. 45On 18 April 2007, Swaab, who were acting for AIAE and Noor Al Houda in connection with the assignment of the lease, wrote to Dr Taluja seeking her written consent to the assignment. The letter, which was delivered on 19 April 2007, enclosed various documents in support of the request, including audited financial statements and information about the schools operated by the trustees. Dr Taluja did not respond to that letter. However, on the day the letter was delivered, Dr Taluja rang Ms Hallgath, the partner at Swaab responsible for handling the assignment. According to Ms Hallgath, Dr Taluja appeared to be happy with AIAE as a tenant. However, Dr Taluja maintained that Noor Al Houda was in breach of the lease:
because of a failure to pay rent for about 8 months;
by going into her surgery and taking jewellery etc at the start of the lease;
because of a wall that needed to be made safe, which would cost approximately $500,000. 46On 25 May 2007, Morgan Ardino & Co, the solicitors acting for Dr Taluja, wrote to Swaab in which they alleged that AIAE had been in occupation of the premises from approximately 1 June 2006 and that Dr Taluja intended to hold Noor Al Houda responsible "for all of their prior breaches". The letter went on to offer a licence agreement to AIAE for a period of 2 years. 47The deed administrator's consent to the assignment of the lease was given on 13 June 2007. 48On 20 June 2007, Dr Taluja sent a further notice to Noor Al Houda purporting to terminate the lease. In that notice, she relied on the following breaches:
The failure to reinstate the walls in Leigh Hall;
The failure to pay arrears in rent said to total in excess of $198,000;
The failure to give Dr Taluja access to Brundah House;
The failure to provide evidence of current insurance;
The failure to give access to toilets used in connection with Dr Taluja's medical centre;
Noor Al Houda's unauthorised access to rooms 15, 16 and 17 of Leigh Hall and the exclusion of Dr Taluja from those rooms in 2004;
Noor Al Houda's unauthorised access to Dr Taluja's rooms in Brundah House as a result of which she lost gold and diamond jewellery worth approximately $60,000;
The fact that Noor Al Houda went into administration in 2003;
The failure to obtain consent from the local Council to carry on the school. 49On 27 July 2007, Noor Al Houda, AIAE, Mr Adada and Ms Ihram signed a deed of assignment by which Noor Al Houda assigned its rights in the premises and the lease to AIAE. In return, AIAE agreed to indemnify Noor Al Houda and Mr Adada and Ms Ihram against any losses they suffer as a consequence of AIAE's failure to comply with the lease obligations. 50There was then further correspondence between AIAE and Dr Taluja and their respective lawyers. As I have already mentioned, during the course of that correspondence, Dr Taluja took steps in July 2010 to appoint a valuer to conduct a market rent review. Ultimately, AIAE commenced these proceedings.

Is the lease void or incapable of registration? 57Section 76A(1) of the Environmental Planning and Assessment Act 1979 ( EPA Act ) provides: If an environmental planning instrument provides that specified development may not be carried out except with development consent, a person must not carry the development out on land to which the provision applies unless: (a) such a consent has been obtained and is in force, and (b) the development is carried out in accordance with the consent and the instrument. "Development" includes the subdivision of land: EPA Act, s 4. "Subdivision of land" means "the division of land into two or more parts that, after the division, would be obviously adapted for separate occupation, use or disposition": EPA Act s 4B(1). The division may be effected by, among other things, "any agreement, ... rendering different parts of the land available for separate occupation, use or disposition": EPA Act s 4B(1)(b). "Land" includes "a building erected on the land": EPA Act s 4. "Building" is defined in the same section to include part of a building. However, "subdivision of land" does not include "a lease (of any duration) of a building or part of a building": EPA Act, s 4B(3)(a). Nor does it include "a division of land effected by means of a transaction referred to in section 23G of the Conveyancing Act 1919": EPA Act, s 4B(3)(d). One of the transactions referred to in s 23G of the Conveyancing Act is a transaction that comprises "the lease of part of an existing lot for a period that, including the period of any option to renew, does not exceed 5 years": s 23G(d)(i). 58The EPA Act contains extensive provisions in Part 6 for the implementation and enforcement of the Act. Section 121B sets out a broad range of orders that a council or consent authority can give in the circumstances specified in the section, including in circumstances where premises are being used for a purpose for which development consent is required but has not been obtained. Section 121ZK gives a person on whom an order is served a right to appeal to the Land and Environment Court. Section 123(1) of the Act provides: Any person may bring proceedings in the Court for an order to remedy or restrain a breach of this Act, whether or not any right of that person has been or may be infringed by or as a consequence of that breach. Section 125 makes it an offence to do anything prohibited by the Act (or not to do anything required to be done under the Act). Section 126 provides for a penalty not exceeding 10,000 penalty units. 59Section 23F(2)(a) of the Conveyancing Act provides that the RegistrarGeneral may refuse to register a lease of part of an existing lot unless "the land to which the transaction relates is shown on a current plan". Exceptions are created by s 23G. As I have already mentioned, one of those is where the lease is for a period that does not exceed 5 years. None of the exceptions is relevant in this case. "Current plan" is defined in s 7A to include a "registered plan". "Registered plan" is defined in s 7 to include, relevantly, a plan of subdivision (para (a)) and "a plan (other than a plan referred to in paragraph (a)-(d)) that is registered or recorded in the office of the Registrar-General for the purpose of showing a parcel in a lawful division of land" (para (e)). In addition, s 37 of the Real Property Act 1900 provides that the RegistrarGeneral may refuse to accept a dealing or instrument for registration if the dealing or instrument purports to give effect to a transaction that contravenes s 23F of the Conveyancing Act . 60The land which is the subject of the lease is governed by the Strathfield Planning Scheme Ordinance . The land is zoned "Residential "B"". Permitted uses include "churches; ... educational establishments; ... places of public worship; professional consulting rooms; ...": see the Table that forms part of cl 22 of the Ordinance. Clauses 41, 41A and 41B place restrictions on the Council's ability to grant consent to development allowed by the table to cl 22. However, none of those restrictions is relevant in this case. Clause 43A of that Ordinance provides: A person shall not subdivide any land without development consent. It follows that, although subject to consent, a subdivision of the relevant land for its current uses may be permitted. 61Mr Raphael makes three submissions in this context. First, he says that no plan was attached to the lease. Second, he says that the lease is void for uncertainty because it describes the land to be leased as "part" of the two lots to be leased. Third, he says that the lease was illegal and so unenforceable because it involves a subdivision of land and therefore a development without Council consent. I do not think that there is any merit in Mr Raphael's first two submissions. The description of the leased land must be read together with the other provisions of the lease. The premises are described as "416-420 Liverpool Street, Strathfield South. Including All existing buildings (excluding the Chapel) and the land." As I have said, the reference to "Liverpool Street" is obviously intended to be a reference to Liverpool Road. Clause 24.15 of the lease provides that notwithstanding the provisions of the lease "the Lessor shall be entitled exclusive access and use of the Doctors Surgery within Leigh Hall College comprising Rooms 15,16 and 17 and the toilet facilities". It is clear that the lease describes the leased land as "part" of the two lots because of the exclusion of the chapel and of rooms 15, 16 and 17 and the toilet facilities of Leigh Hall. Those exclusions are capable of precise identification. Consequently, the lease is not void for uncertainty. The fact that no plan was attached does not alter the position. 62Mr Murr, who appeared for AIAE, makes two submissions in answer to Mr Raphael's third point. First, he submits that the lease did not involve a subdivision of land because the lease does not render different parts of the land available for separate occupation. It simply renders a different building or parts of a building available for separate occupation. Mr Murr accepts that it is still necessary for a plan to be registered to satisfy the requirements of s 23F of the Conveyancing Act . However, the court can make an order requiring that to be done. Secondly, Mr Murr submits that, if development consent is required, the court should imply a term in the lease requiring Dr Taluja to do all things reasonable on her part to be done to obtain that consent and the court can order specific performance of that term. 63I do not accept Mr Murr's first submission. In support of that submission, Mr Murr relies on the decision of Jacobs J in Re Lehrer [1961] SR (NSW) 365. That case concerned four leases. Relevantly, one was for the first floor of a building and another was for a flat in the building. Both leases were for more than 5 years. The question was whether those leases effected a subdivision within the meaning of s 4 of the Local Government Act 1919, the predecessor of the EPA Act. "Subdivision" and its grammatical variants was defined under the earlier Act, relevantly, to mean the division of land into parts rendering different parts thereof immediately available for separate occupation or disposition. "Land" as defined in s 4 of the Act "includes a mine and also includes any river, watercourse, or inland water, tidal or non-tidal". Jacobs J held that space in a building, although real property, was not "land" for the purposes of the Act. Consequently, the lease of space in a building did not involve a division of land into two or more parts. 64The short answer to Mr Murr's first submission, however, is that a building and a part of a building are "land" for the purposes of the EPA Act: see the definition of "land" in s 4 (quoted above). The Chapel is a building erected on the land. Consequently, it is itself land for the purposes of the Act. The effect of the lease is to divide that piece of land from the rest of the land the subject of the lease to make them available for separate occupation and use. The lease therefore effects a subdivision. Similarly, rooms 15, 16 and 17 of Leigh Hall are clearly part of a building and so a building and therefore land for the purposes of the Act. Consequently, the lease also effects a subdivision in respect of those rooms. 65I do, however, accept Mr Murr's second submission. That submission raises two issues. The first is whether the lease is unenforceable because it breaches s 76A(1) of the EPA Act. The second is whether, if not, there should be implied in the lease a term requiring Dr Taluja to do all things reasonable on her part to be done to have the lease registered (including applying for planning approval for the subdivision). 66As to the first issue, the EPA Act does not expressly address the enforceability of agreements that involve a breach of the Act. Whether the Act has that effect depends, then, on its proper construction. As Mason J explained in Yango Pastoral Co Pty Ltd V First Chicago Australia Ltd (1978) 139 CLR 410 at 423: The principle that a contract the making of which is expressly or impliedly prohibited by statute is illegal and void is one of long standing but it has always been recognized that the principle is necessarily subject to any contrary intention manifested by the statute. It is perhaps more accurate to say that the question whether a contract prohibited by statute is void is, like the associated question whether the statute prohibits the contract, a question of statutory construction and that the principle to which I have referred does no more than enunciate the ordinary rule which will be applied when the statute itself is silent upon the question. Where the statute is silent, the court will, in determining whether on its proper construction the statute renders the relevant contract void, take into account matters such as the purpose of the legislation, whether the legislation expressly prohibits the conduct in question, whether the legislation provides for the consequences of breach and the consequences for the parties if the legislation does have the effect of rendering the contract void. 67There are several decisions which have considered the validity of agreements apparently entered into in breach of the EPA Act or similar legislation. The one that most closely resembles the current one is Hardy v Wardy [2001] NSWSC 180. In that case, the defendant owned land on which was situated a large two-storey warehouse and office and a separate one-storey building used to operate a smash repair business. Both buildings were on the same title. The defendant leased the warehouse and offices to the plaintiff. The lease contained an option to purchase. The plaintiff purported to exercise that option. Between the time the option was granted and the time it was exercised, the Local Government Act was replaced by the EPA Act. One question in the case was whether the agreement resulting from the exercise of the option was void because it effected a subdivision of land. Bryson J held that it was not: [48] ... If subdivision is altogether forbidden an agreement to subdivide may be affected by illegality, but if the relevant Environmental Planning Instrument allows the subdivision to be consented to there would in my opinion be no reason why an agreement to carry out the subdivision would be illegal. [49] Entering into a contract carrying of which [sic] requires a subdivision, or a contract to carry out any other development, cannot itself be seen as development and in my opinion is not affected by any question of illegality. Counsel were unable to refer me to any statutory provision which could be thought to prohibit or make illegal any such agreement, and in my understanding there is none. 68These paragraphs appear to contain two separate reasons. One is that an agreement to carry out a subdivision to which consent can be given is not illegal. The other is that an agreement to carry out a development was not itself a development. Neither of these reasons strikes me as being entirely satisfactory. The prohibition in s 76A(1) is against carrying out the development unless "such a consent has been obtained and is in force". The tense and the requirement that the consent be in force clearly suggest that a development contravenes the section if, at the time the development occurs, consent has not been obtained. In the case of a subdivision, the relevant development is the division of the land. That division may be effected by, among other things, an agreement. Consequently, it is the agreement itself which is the development. 69There are other cases in which courts have held that an agreement to engage in conduct which is prohibited by the EPA Act is not void. For example, in Australian National Car Parks Pty Ltd v State Rail Authority of NSW [2005] NSWSC 120 the lease provided that the leased premises were not to be used otherwise than for car parking purposes. That use was prohibited by the relevant Local Environmental Plan. The lessee argued that, for that reason, the lease was void. That argument was rejected by Malpass M: [21] ... The relevant provisions of the statute and of the Plan do not expressly prohibit the making of such a tenancy agreement or make it void. They do not expressly address the question of enforceability of contracts. The Plan itself is concerned with development. ... What the Environmental Planning and Assessment Act 1979 and the Environmental Planning and Assessment Regulation 2000 do is inter alia provide remedies, create offences and impose penalties. See also Perman v Wenholt-Dwyer [2004] NSWSC 48. 70In my opinion, the approach taken by Malpass M should be applied in this case. Although earlier authorities suggest that a lease involving use of premises contrary to planning laws is unenforceable, as Giles J pointed out in Bawofi Pty Ltd v Comrealty Ltd (1992) NSW ConvR 55-646, those decisions were handed down before the decision of the High Court in Yango Pastoral Co ; and that were taken in relation to legislation that has been superseded by the EPA Act. 71The EPA Act treats subdivision as a form of development. It is not generally concerned with agreements. It is concerned with the way in which land is used. It provides a comprehensive structure for regulating that use. As part of that structure it permits local authorities to specify particular uses which may be the subject of consent. If land is used in a way that is inconsistent with the consent that is given or in the absence of consent, the Act gives local authorities and others broad powers to ensure that the objectives of the Act and relevant subordinate legislation are met. In exercising those powers, the local authorities and the Land and Environment Court can consider the nature of the conduct that is engaged in breach of the Act and the objectives sought to be achieved by the relevant prohibition in fashioning an appropriate order. One possibility is that the local authority or the court will decide consent should be given to the relevant activity or development, as happened when consent was sought to Noor Al Houda and Holdings continuing to operate a school at the premises. In those circumstances, I do not think that s 76A(1) of the EPA Act should be read as intending to render void all agreements made in breach of its provisions. 72Once it is accepted that the lease is not void because it involves a breach of s 76A(1) of the EPA Act, in my opinion a term is to be implied that Dr Taluja will do all things reasonable on her part to be done to have the lease registered, including obtaining the Council's consent to the subdivision effected by the lease. That implied obligation arises from the fact that Dr Taluja agreed to grant a lease of the premises the subject of the lease to Noor Al Houda for 25 years. That lease can only take effect if the lease is registered. In order to register the lease, the land to which the transaction relates must be shown on a current plan. Relevantly, the current plan must be a registered plan which is a plan of subdivision. However, a plan of subdivision cannot be registered unless the subdivision has been approved. The agreement to grant the lease carries with it an agreement to do all things reasonable to give effect to that agreement: Butts v O'Dwyer (1952) 87 CLR 267. Consequently, it carries with it an agreement to do all things reasonable on Dr Taluja's part to be done to obtain approval to the subdivision and registration of the plan of subdivision.

Australian International Academy of Education Limited v Dr Nirmal Taluja & Ors

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