Supreme Court of Tasmania|2011-12-21|Before: Crawford CJ

CMA Recycling Victoria Pty Ltd v Doubt Free Investments Pty Ltd [2011] TASSC 71 (21 December 2011)

CITATION: CMA Recycling Victoria Pty Ltd v Doubt Free Investments Pty Ltd

Landlord and Tenant - Termination of the tenancy - Repudiation - What amounts to - Breaches of essential terms to keep in repair and to promptly repair damage - Application of principles of contract law - Whether breaches amounted to repudiation.

Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17; Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115, applied.

Landlord and Tenant - Termination of the tenancy - Forfeiture - Generally - Re-entry under contract law for breaches of essential terms - Breaches of covenants to keep in repair and promptly repair damage - Provision in lease for termination - Whether contract law applied - Whether compliance with Conveyancing and Law of Property Act 1884 (Tas), s15, required - Whether lease stipulated that termination under contract law was excluded.

Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17, followed.

Apriaden Pty Ltd v Seacrest Pty Ltd [2005] VSCA 139; (2005) 12 VR 319; World Best Holdings Ltd v Sarker [2010] NSWCA 24; Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268, considered.

Landlord and Tenant - Termination of the tenancy - Forfeiture - Relief against forfeiture - Equitable relief - Whether available - Breaches of essential terms requiring tenant to keep in repair and promptly repair damage - Gravity of breaches.

Byron Bay Retirement Villages Pty Ltd v Zandata Pty Ltd [2008] NSWSC 1123; Mineaplenty Pty Ltd v Trek 31 Pty Ltd [2006] NSWSC 1203; Greek Macedonian Club Ltd v Pan Macedonian Greek Brotherhood NSW Ltd [2007] NSWSC 92; Water Wine & Juice Pty Ltd v Konstantopoulos [2010] NSWSC 312; Shiloh Spinners Ltd v Harding [1973] AC 691; Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406; Esther Investments Pty Ltd v Cherrywood Park Pty Ltd [1986] WAR 279; Minister for Lands and Forests v McPherson (1991) 22 NSWLR 687, followed.

Judgment Number: [2011] TASSC 71

CMA RECYCLING VICTORIA PTY LTD (ABN 48 005 667 103) v DOUBT FREE INVESTMENTS PTY LTD (ACN 113 981 141)

1 The plaintiff conducts a scrap metal recycling business at 256 George Town Road, Rocherlea. It has leased the premises from the defendant since 4 July 2007.

2 On 16 May 2011, the defendant purported to terminate the lease by re-entering the property. Interim orders were made subsequently by Wood J permitting the plaintiff to resume possession pending the hearing of this action.

3 The plaintiff sued the defendant seeking determinations that the purported termination of the lease had no effect and that the lease is valid and subsisting. In the alternative, the plaintiff sought relief against forfeiture. It also sought damages for breach of contract, and aggravated and exemplary damages for trespass.

4 The action was defended and the defendant made counterclaims. It sought a determination that it validly terminated the lease on 16 May and it asked for an order for possession. It also sought damages and an indemnity in respect of losses suffered or incurred by it.

5 On 29 June, Wood J ordered that the claims of the plaintiff and the defendant for damages are to be tried separately to and after all other issues in the action. The hearing of the action in other respects proceeded before me.

6 Issues raised by the parties included whether the plaintiff breached terms of the lease and in particular, covenants to keep the premises in good repair and condition and to promptly repair damage; whether the defendant was entitled to terminate the lease and did so under the common law of contract because of the plaintiff's breaches of essential terms, fundamental breaches of contract and repudiation of its obligations under the lease; whether the defendant was bound to comply with the Conveyancing and Law of Property Act 1884 (Tas), s15(1) and whether it failed to do so; and whether, if the defendant validly terminated the lease, the plaintiff was entitled to apply for relief against forfeiture of the lease and if so, whether relief should be granted.

7 For reasons I will explain, I have determined that the plaintiff breached essential terms of the lease by failing to keep the premises in good repair and condition and by failing to promptly repair the damage; that the plaintiff did not repudiate its obligations under the lease; that the defendant validly terminated the lease on 16 May under the common law of contract because of the plaintiff's breaches of essential terms; that the defendant was not required to comply with s15(1) before terminating the lease; and that although the plaintiff was entitled to apply for relief against forfeiture, the Court should not grant that relief.

8 A scrap metal recycling business has operated at the premises since 2005. Initially it was operated by Universal Metals Pty Ltd under the control of Mr D T Rowe. The south-western boundary of the land faces George Town Road. The property and its improvements are owned by the defendant, Doubt Free Investments Pty Ltd, which at all material times was under the control of Mr Rowe. He is the sole director, secretary and owns most of its shares. At first, Universal Metals Pty Ltd operated on the land pursuant to some arrangement with the then owner. The defendant became the owner of the land in December 2008.

9 On or before 4 July 2007, the shares in Universal Metals Pty Ltd were sold to other interests and the company changed its name to CMA Recycling Victoria Pty Ltd, which is the plaintiff in this action. The plaintiff took a formal lease of the site commencing on 4 July 2007.

10 The business operates on only part of the defendant's land. The defendant's land that adjoins the business' premises extends to the north-east of the rear boundary and includes a strip of land running along the north-western boundary from George Town Road. That adjoining land of the defendant is unimproved.

11 For much of the north-western and south-eastern boundaries and all of the north-eastern (rear) boundary there is a boundary fence described as tilt up concrete panels on concrete footings held in place by flanges on upright steel posts. Approximately midway along the north-western boundary of the premises there are a number of bays with concrete walls, perpendicular to the boundary fence, and more robust than it. They have been used by the plaintiff for storing scrap metal.

12 Near the bays is a machine called a Lindemann baler and shear, which is used to cut and crush scrap metal items. The crushing operations led to polluting fluids being flushed through the boundary fence onto the defendant's neighbouring land approximately midway along the north-western boundary.

13 The plaintiff trades, recycles and processes predominantly ferrous and non-ferrous metal products. It purchases ferrous and non-ferrous scrap metal from a range of suppliers. It processes the scrap metal so that it can be transported more efficiently. The scrap is then sold.

14 At the time the current dispute between the parties commenced, the plaintiff stored on the land a considerable amount of scrap metal, particularly in the bays and covering much of the rear of the property. The height of the piles was so great that some items fell over the top of the walls onto the defendant's neighbouring land. Further, the weight of items against the boundary walls caused damage to the walls, pushing some panels outwards, sometimes out of the flanges of the steel uprights, and cracking and generally damaging panels.

15 At the commencement of the lease, much of the surface of the land that was not covered by a building was paved with interlocking concrete pavers in a herringbone design. The operations of the plaintiff have caused some damage to the paved surface. For example, indentations have appeared in some areas and some pavers have been torn out of the ground. Damage has also been caused to some concrete kerbs and to a steel picket fence, although the damage is relatively minor.

The lease and the Conveyancing and Law of Property Act, s15

1">16 The lease is dated 4 February 2010 but it commenced on 4 July 2007. The difference between the dates arises out of the fact that after the premises were leased to the plaintiff, the lease was rewritten and re-signed. A number of its provisions must be mentioned.

17 Under cl 9.1 of the lease, the tenant may only use the premises for the permitted use of "metal recycling/waste handling depot and transfer station". Under cl 9.3, no warranty of any kind is given by the landlord that the premises are suitable for any purpose for which the tenant intends to use them. By cl 12.1(a) and (b) it is agreed that the tenant accepts the condition of the premises as at the commencement of the lease, and that the landlord makes no express warranties, or provides any covenants, as to the condition, description, state, quality, fitness and/or suitability of the premises for the permitted use.

18 Importantly, under cl 14.1(a) the tenant must keep the premises in good repair and condition (fair wear and tear excepted), and under cl 14.1(c) the tenant must promptly repair any damage to the premises caused or contributed to by the tenant or its employees, agents and visitors. Clause 14.3 requires the tenant to carry out all building work of a structural nature made necessary by damage of the kind referred to in cl 14.1(c), the nature of the tenant's business or its use of the premises. Under cl 14.4, the tenant must inform the landlord of any damage to the premises immediately upon becoming aware of it. Under cl 14.7, the tenant must not cause damage to the premises or allow them to be damaged.

19 Under cl 13, "the Tenant must comply with the requirements of any Authority [by cl 1.1 an Authority includes any local authority such as the Launceston City Council] and all laws in connection with the Premises and the Tenant's Property and the Tenant's Business but the Tenant need not carry out work of a structural nature except as provided in clause 14.3." Under cl 14.8, in carrying out its obligations under cl 14, the tenant must (a) comply with the requirements of any Authority and all laws and standards; (b) before carrying out any building work, obtain the landlord's approval to the plans and specifications for the work; and (c) carry out the building work in a safe and proper manner.

20 Clause 15.1(f) imposes on the plaintiff an obligation to "immediately deliver to the Landlord a copy of every notice received by the Tenant relating to the Premises."

21 Clauses 17.1, 17.2 and 17.3 are particularly important in the dispute between the parties. They state:

The following obligations of the Tenant are essential terms of this Lease:

(a) all obligations to pay money under this Lease; and

(b) the obligations under clauses 8.1, 9.1, 14.1 and 14.5.

This clause 17.1 does not prevent any other obligation of the Tenant under this Lease being an essential term.

An Event of Default occurs if:

(a) the Tenant repudiates or commits a fundamental breach of this Lease:

(b) the Rent is at any time unpaid for seven days after becoming due, whether formally demanded or not:

(d) a judgment, order or Security Interest is enforced or becomes enforceable against the Tenant's interest in this Lease or the Tenant's Property; or

(e) an Insolvency Event occurs with respect to the Tenant or a Guarantor.

If an Event of Default occurs, the Landlord may terminate this Lease by:

(a) re-entering the Premises without notice; or

(b) notice to the Tenant

except that when s15(1) of the Conveyancing and Law and Property Act 1884 applies, the Landlord may only terminate this Lease if the Landlord has first given to the Tenant a notice which complies with that section and the Tenant has failed to comply with that notice within fourteen (14) days."

22 In summary, the defendant landlord's case is that the plaintiff tenant caused damage to the premises, failed to keep it in good repair and condition, failed to promptly repair any damage it had caused and failed to comply with the requirements of the Council to prevent, control or reduce likely environmental harm from pollutants that escaped onto the adjoining land of the defendant, and that the consequent breaches of the lease amounted to a repudiation of it by the plaintiff which the defendant accepted, by treating the lease as at an end and re-entering on 16 May 2011. It is also the defendant's case that some of the plaintiff's breaches amounted to breaches of essential terms in any event, and were fundamental breaches of contract, entitling it to re-enter.

23 Against that, the plaintiff's position is that its conduct was not repudiatory and that in any event, the defendant was required to give to the plaintiff a notice under the Conveyancing and Law of Property Act, s15(1), requiring it to remedy the breaches within a reasonable time, and the defendant failed to comply with the subsection. In the alternative, if the lease was validly terminated by the defendant, the plaintiff seeks relief against forfeiture.

24 The material provisions of s15 are the following:

"15 Restrictions on and relief against forfeiture of leases

(1) A right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant or condition in the lease, shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice specifying the particular breach complained of and, if the breach is capable of remedy, requiring the lessee to remedy the breach, and in any case requiring the lessee to make compensation in money for the breach, and the lessee fails, within a reasonable time thereafter, to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, 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, the lessee may, in the lessor's action, if any, or in any action brought by himself, apply to the Court for relief; and the Court may grant or refuse relief as 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, thinks fit; and in case of relief may grant it 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.

...

(7) This section shall not affect the law relating to re-entry or forfeiture or relief in case of non-payment of rent.

(8) 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."

25 There is a history of a poor relationship between the plaintiff or its holding company and Mr Rowe. On 1 February 2008 he was appointed managing director of the holding company, CMA Corporation Ltd. In May 2010 he was summarily dismissed by that company and in the second half of 2010, it commenced two Federal Court proceedings against him. Those proceedings settled, one shortly before trial and the other after all the evidence had been led.

26 Sometime before 31 March 2011, the defendant complained to the Launceston City Council about the effect of the plaintiff's operations on the defendant's adjoining land. As a result, on 31 March the Council's pollution control officer, Ms S McLaughlin, sent an email to Mr L Godden, the plaintiff's state manager, in which she said she was concerned that breaches of conditions in a planning permit relating to the land had been committed.

27 On 1 April, there was a meeting at the plaintiff's site between Ms McLaughlin, the Council's Acting Manager of Environmental Services, Ms T Lau, Mr Godden and the plaintiff's site manager, Mr L Triffitt. The Council's officers informed Mr Godden that it was considered that the plaintiff was breaching a planning permit and that it would be fined and issued with an environmental protection notice.

28 The impression gained by Mr Godden was that the major problem was that the site was overstocked, which had led to containers being stored in the front of the property, trucks backing across George Town Road, cars parked on the street, a lack of thoroughfare and a scrap stockpile that was too high. That afternoon he commenced to make arrangements to move stock off the site. To achieve that he had, by the following week, spoken to his site manager, contacted shipping lines and arranged for contractors to cart loads of scrap to local outlets. The level of stock started to reduce that week.

29 On 4 April the Council issued to the plaintiff an Environmental Protection Notice ("the EPN") under the Environmental Management and Pollution Control Act 1994, s44(2). The notice asserted that on and prior to 28 March, as a result of the process of maintaining and operating a metal recycling infrastructure on the premises, pollutants were being emitted from the property onto adjoining land; they included solid and liquid wastes and were likely to cause environmental harm and interfere with a person's enjoyment of the environment; and environmental harm had occurred and was likely to be caused by the continued emission of the wastes discharged from the operations beyond the boundaries of the property.

30 The EPN required certain measures to be taken to prevent, control or reduce likely environmental harm and to remediate such harm. There was ambiguity in the time limits prescribed by the notice. To demonstrate that I cite a passage from the operative part of it and then refer to other passages that appeared to conflict with it:

"WHAT MUST BE DONE

Pursuant to Section 44(2) of the Act, within 90 days of the date on which this notice is served on you, I require you to take the following measures to prevent, control or reduce likely environmental harm and to remediate such harm, namely:-

a) Immediate Action: Cease to cause or permit the escape of 'process' solid and liquid wastes from the property.

b) Immediate Action: Cease receiving and or storing additional material intended for recycling until clean-up/remediation of the sites and preventative actions have been taken to the satisfaction of Launceston City Council."

31 Succeeding paragraphs of the EPN required other measures to be taken, some within 21 days, some within 30 days, some within 60 days and some without reference to a time. The ambiguity to which I referred arises out of the opening requirement of the notice that "the following measures" were to be taken "within 90 days of the date on which this notice is served on you". Obvious questions that arose from the EPN were whether the immediate action referred to in pars a) and b) was to be taken immediately or instead, within 90 days, and whether the measures to be taken within 21, 30 or 60 days were to be taken within those times, within 90 days or within some other time.

32 Clause 15(1)(d) of the lease appears to have required the plaintiff, upon receipt of the EPN, to immediately deliver a copy of it to the defendant. It did not do so. Mr Godden's evidence was that the reason was that he was unaware that the lease required it. Nevertheless, it appears that the Council sent a copy of the EPN to the defendant.

33 I accept the evidence of Mr Godden about the work done by the plaintiff, shortly after receipt of the EPN, to address the concerns raised by the Council. Stock levels at the premises were reduced from 3,789,278 kilograms on 31 March to 2,181,600 kilograms on 17 May and 1,311,093 kilograms on 21 June. The plaintiff negotiated and entered into a contract for services with a new container carrier who was able to remove stock from the premises for export faster than the previous container carrier. Stock was sold to local Tasmanian dealers at a reduced margin in order to clear it from the site. Material was moved directly to a local outlet without it first coming onto the plaintiff's premises. Many transfers from the plaintiff's Burnie premises were stopped and later scrap was transferred directly to Victoria from Burnie. While the EPN was in place, the plaintiff ceased to accept and store ferrous metals from the Council in order to reduce stock levels.

34 The plaintiff engaged environmental engineers, GHD, to conduct soil testing of the premises and the adjoining land and to provide a remediation plan as required by the EPN. It obtained a quotation from Atma Environmental for soil investigations. Mr Godden made arrangements with Sunrise Bakery, the neighbour on the south-eastern boundary, to clean up scrap that had spilled over the fence. He had frequent discussions with the Council over the steps the plaintiff was taking.

35 On 21 April, Ms McLaughlin emailed Mr Godden, sending a copy of a 2005 site plan showing pits on the property. She added that it was good news that they would be cleared out soon. Later that day, Mr Godden replied with "a brief run down on where we are up to now". Included in his advice was that GHD had been engaged to conduct soil testing; Ratio, specialists in statutory requirements, were to make sure all such requirements were met and handled in a timely manner; and David Naismith Engineers had been requested to assess the tilt panel walls. Mr Godden asked Ms McLaughlin if it was possible to obtain access to the adjoining property (of the defendant) to begin the remediation process, referring to steel and other scrap material on the surface and obviously indicating an intention to have it removed. He said that the plaintiff would be in a position to complete that on 3 and 4 May and asked Ms McLaughlin to "confirm this will be acceptable". Mr Godden explained that the plan was to reduce stock levels first, which would allow assessment of appropriate remediation and repair work, which would include uncovering pits and traps and assessing them.

36 The Easter break immediately followed. On Wednesday, 27 April, Mr Godden emailed Ms McLaughlin again advising that he was meeting GHD on Monday morning, presumably a reference to 2 May. He said the purpose of the meeting was to assess what needed to be done and he asked if access could be gained to the defendant's adjoining land for that purpose. On the same day, Ms McLaughlin emailed Mr Godden advising that she would call Mr Rowe and tell him to have one of the defendant's employees open the gate to the property on the Monday morning.

37 Later on 27 April, Ms McLaughlin emailed Mr Godden asking for a revised and achievable time frame to carry out the works required by the EPN. She acknowledged that the Council was aware that in order for the required works to be completed satisfactorily, additional time to what was originally dictated in the EPN might be required. She said that the Council was willing to facilitate an extension of time within reason in the interests of resolving the issues.

38 Earlier, the defendant engaged build assess pty ltd[sic] to inspect the property occupied by the plaintiff and provide a report identifying any structural defects or damage in relation to the premises and the cause of them; assessing whether there had been any breach of the plaintiff's maintenance obligations under the lease; making recommendations for repair; providing an estimated date of occurrence and whether there had been deterioration over time; and providing estimates of the cost of repairs. A report dated 24 April 2011 was received by the defendant. It revealed that there had been an inspection of the property on 7 March and 10 April. With accompanying photographs, the report detailed the extent to which stock was spilling over the fence panels around the perimeter of the property and the extent to which damage had been caused to the fence, paving, kerbing and picket fence. The author of the report expressed his opinion as to the causes of the damage being largely due to careless use of the premises and advised that the plaintiff had breached its repair and maintenance obligations under the lease. Recommendations for repair were made.

39 On 28 April 2011 the defendant's lawyers sent a formal letter to the plaintiff by Express Post. It was received on the following day. It was accompanied by copies of the EPN and the report of build assess pty ltd. It stated early in the letter that its purposes were to provide the plaintiff with copies of each of those documents, to identify those provisions of the lease which had been breached by reason of matters set out in those documents, and to give notice of the defendant's requirements in respect of those breaches and of the defendant's intention in the event of the plaintiff's failure to remedy those breaches.

40 The letter is important to a consideration of the case and for that reason, I state the balance of its contents in full:

"This letter constitutes a notice (Notice) under section 15(1) of the Conveyancing and Law of Property Act 1884 (Tas.)

1 Breaches by reason of EPN

The Landlord hereby gives notice that the following clauses of the Lease have been breached by reason of the matters set out in the EPN -

1.1 Clause 12.1(c) - using, permitting or allowing the Premises to be used in a manner contrary to law;

1.2 Clause 13 - failing to comply with the requirements of any Authority and all laws in connection with the premises.

1.3 Clause 15.1(a) - failure to carry on the Tenant's Business in a proper manner.

1.4 Clause 15.1(f) - failure to provide the landlord with a copy of the EPN.

1.5 Clause 15.2(a) - conducting the Tenant's Business in a manner which is offensive or a nuisance.

1.6 Clause 15.2(c) - using the facilities in or near the premises for an improper purpose.

2 Breaches identified from the Building Report

The Landlord hereby gives notice that the following clauses of the Lease have been breached by reason of the matters set out in the Building Report -

2.1 Clause 14.1 - failure to keep the premises in good repair and condition.

2.2 Clause 15.1(a) - failure to carry on the Tenant's Business in a proper manner.

2.3 Clause 15.2(b) - interfering with or obstructing access to or overloading the Services.

2.4 Clause 15.2(c) - using the facilities in or near the Premises for an improper purpose.

3.1 By this letter the Landlord gives you, as Tenant, notice that the Landlord requires that you -

a) Comply with the requirements of the EPN as you are required to do pursuant to Clause 13 of the Lease; and

b) Promptly repair the damage to the Premises identified in the Building Report as you are required to do under Clauses 14.1(c) and 14.3 of the Lease (collectively Rectification Works) -

both within a reasonable time after the date of this letter.

3.2 The Landlord is unable to estimate a reasonable time for compliance at this time. In this regard the Landlord will treat the Notice as having been complied with if you -

a) within 16 days of the date of this letter provide to the Landlord a timetable (Timetable) for completion of the Rectification Works acceptable to the Landlord (acting reasonably); and

b) within 23 days of the date of this letter enter into a further variation of the lease to incorporate, as an essential term of the Lease, a clause by which you will covenant with the Landlord to complete the Rectification Works at your cost in accordance with the Timetable.

4 No Waiver

Pursuant to Clause 17.1 of the lease your breach of Clause 14.1 of the lease constitutes a breach of an essential term of the Lease. Nothing in this Notice constitutes, or should be taken as constituting, a waiver of: -

a) the Landlord's right to treat the breach of clause 14.1 of the Lease as a repudiation of the Lease (which the Landlord may accept) and the landlord expressly reserves the right to do so; or

b) the Landlord's rights to damages pursuant to the Lease or at law.

The landlord reserves its right to recover all of its costs arising out of or incidental to the breaches of the lease identified in this Notice including, without limitation, the Landlord's costs and expenses in obtaining the Building Report and the Landlord's legal costs and expenses on a full indemnity basis in accordance with Clause 21.1 of the lease.

If you fail to comply with the Landlord's requirements specified in paragraph 3.2 of this Notice, the landlord will, at its election, either forfeit the Lease or accept your repudiation of the Lease constituted by your breach of clause 14.1 thereof. In either case the Lease will then be at an end and the Landlord will require immediate vacant possession of the Premises."

41 There are obvious difficulties when attempting to gain a complete understanding of the intended effect of the letter. When read alone, cl 3.1 is consistent with the earlier statement that the letter constituted a notice under the Conveyancing and Law of Property Act, s15(1). It required that within a reasonable time from the date of the letter the plaintiff comply with the requirements of the EPN and repair the damage to the premises. It was common ground between counsel that it is not unusual for a notice under such a statutory provision to specify that remedial action must be taken within a reasonable time, rather than a specific time.

42 In the course of an address from the plaintiff's counsel, I described the contents of cl 3.2 as appearing to amount to a concession by the defendant that if there was compliance with what it stated, compliance with cl 3.1 of the notice would be deemed to have occurred. I said that because cl 3.2 stated that the provision by the plaintiff within 16 days of a timetable for completion of "Rectification Works" and the entering into of a variation of the lease within 23 days, would be treated by the defendant as compliance with the Notice.

43 However, my reference to cl 3.2 as a concession was inaccurate. It amounted to a demand. Clause 6 gave notice that if the plaintiff failed to comply with the requirements of cl 3.2, the defendant would terminate the lease by either forfeiting it or accepting a repudiation of the lease by the plaintiff, which repudiation, by implication, it asserted had occurred. In other words, by the combination of cl 3.2 and cl 6, the defendant stipulated that unless there was compliance with its demand in cl 3.2 the lease would be at an end.

44 Despite the statement in the letter that it constituted a notice under s15(1), it amounted to more than that. In reality the letter amounted to a demand that the plaintiff comply with cl 3.2, and notice that if it did not do so the lease would be treated by the defendant as at an end.

45 On the same day, 28 April, the defendant's lawyers sent another letter to the plaintiff by Express Post. It was written on behalf of the defendant in its capacity as the owner of the adjoining land. The letter observed that in the EPN it was noted that pollutants were being emitted from the property leased to the plaintiff onto the adjoining land and that the pollutants, which included solid and liquid wastes, were likely to cause environmental harm and interfere with a person's enjoyment of the environment. The letter also observed that in the report of build assess pty ltd it was noted that a substantial amount of scrap material had fallen over the concrete panel fence onto the adjoining land without the defendant's consent.

46 The letter continued that a representative of the Council had informed the defendant that the plaintiff had sought to engage GHD for the purpose of undertaking an environmental assessment and preparing a remediation plan. The letter asked whether GHD had been formally engaged by the plaintiff and if so, for what purpose. The letter then gave formal notice to the plaintiff that the defendant did not consent to GHD having access to the adjoining land unless:

(a) all access arrangements were made through the defendant's representative, Mr M McLean;

(b) GHD agreed to only access the adjoining land in the presence of Mr McLean "and not with any representatives of" the plaintiff; and

(c) the plaintiff irrevocably authorised GHD to immediately release a copy of all environmental and remediation reports prepared in relation to either the leased land or the adjoining land to the defendant's lawyers.

47 It is the plaintiff's case that the defendant acted unreasonably in not allowing any of its representatives to enter the defendant's adjoining land with GHD for the purpose of making a proper assessment of what needed to be done in response to the EPN and generally to remove any liquid or solid material that had escaped from the leased land onto the adjoining land. It is also the plaintiff's case that the defendant's demand for the immediate release of GHD's reports was an unreasonable condition for allowing GHD to enter the adjoining land.

48 The letter also stated that the plaintiff was required to:

"a) immediately make arrangements with our client's representative, Mal McLean, for the purpose of you removing all material on the Adjoining Land including all tyres and timber, computer waste, leaded glass, oil etc which you have deposited on the Adjoining Land; and

b) pay our client occupation rent for the unauthorised use of the Adjoining Property from the date our client obtained its interest in the property, being 15 December 2008."

49 On 29 April, Mr Godden advised the Council's Ms McLaughlin that the defendant's Mr Rowe had told GHD's representative, Mr Topliss, that he could have access to the adjoining land but not with CMA staff. Mr Godden complained that he could not instruct the plaintiff's contractor through a concrete wall on things he was yet to see. He added that the plaintiff needed to clean up on top of the ground the following week and asked if that could be arranged.

50 On 2 May, Mr Godden emailed Ms McLaughlin again with a copy of the EPN he had marked up with advice and comments. He indicated a timetable for completing some of the work required by the EPN. He stated that GHD had been engaged to test and advise on remediation but added that "we were unable to access the appropriate areas today". He said that GHD had advised loose timeframes around four weeks for testing. He repeated the request for access to the site the following week "for above ground remediation namely the removal of debris on the site next door".

51 Concerning the requirement of the EPN to cease receiving and storing additional material intended for recycling until clean-up/remediation of the sites and preventative actions had been taken to the satisfaction of the Council, he made the point that the plaintiff would be out of business if it discontinued receiving scrap, but advised that "no more ferrous council scrap will be accepted into our facility until a revised EPN has been issued". He emphasised the need for access for equipment to clear above ground material and to let GHD onto the site for its part of the below ground process.

52 Also on 2 May, the Council issued an amended EPN in line with suggestions that had been made by Mr Godden. Compared to the original EPN, it was much clearer concerning the times within which action by the plaintiff was required. For example, the reference to a 90 day time limit at the outset of the operative part of the EPN was removed. Further, the requirement that the plaintiff immediately cease receiving and storing additional material was replaced with a requirement only that the plaintiff "restrict the receival and or storage of any additional material intended for recycling to a minimum until clean-up/remediation of the sites and preventative actions have been taken to the satisfaction of the Launceston City Council." The only action that was immediately required was that the plaintiff cease to cause or permit the escape of solid and liquid wastes from the process. The time limits for compliance with other requirements of the EPN were amended, in almost all cases by extending or changing them to 30 June 2011.

53 The Council withdrew the amended EPN on 25 May. There was no breach of it before it was withdrawn.

54 It is apparent from the evidence that at all material times the plaintiff did what it reasonably could to enable the Council's reasonable expectations to be achieved. The relationship appears to have been a cooperative one.

55 Mr Topliss of GHD visited the plaintiff's site on 2 May. However, he was unable to gain access to the defendant's adjoining land "due to access conditions". I infer that the conditions the defendant imposed for access were not acceptable to the plaintiff and had not been accepted. On 3 May he asked the Council for information that might assist him in his task.

56 On 6 May 2011, Ms McLaughlin emailed the defendant's Mr Rowe stating that the plaintiff's Mr Godden had requested access to the defendant's property the following week "to get the surface clean done". She also reminded Mr Rowe that GHD required access to the site "to carry out testing so that a complete remediation can take place". Mr Rowe was asked to advise Mr Godden as to when access would be permitted for those purposes. She suggested the sooner the better for everyone.

57 On the same date, the defendant's lawyers maintained to the plaintiff's lawyers that the defendant would not consent to GHD having access to the adjoining land unless the defendant's previously stated conditions upon which access would be allowed were accepted.

58 On 9 May, Ms Lau emailed Mr Rowe to say that "I need your authorisation for CMA and or their agents to gain access to your property so that an assessment and clean-up can be made as required under the EPN issued". She made the point that the defendant's Mr McLean could be on site to supervise if Mr Rowe so required. She added that "the keys to the gate need to be available tomorrow or as soon as possible".

59 Mr Rowe's reply was to make the point that the plaintiff had not replied to a letter from the defendant over 10 days previously and that it should do so. It is apparent that he was indicating that the defendant was not prepared to give ground concerning the conditions it had demanded.

60 On the following morning, Ms Lau responded, obviously with a sense of frustration concerning the defendant's position, stating: "I only want to know whether you will or you won't allow CMA and or their agents gain access for assessment and clean-up. A very simple yes or no will suffice."

61 Mr Rowe's response was to maintain the defendant's position. He did not answer what she was asking. He said that the plaintiff should "respect the process", "go through the right channels" and "better still let them respond to the letter we sent to them as most professional companies would."

62 Later that morning she emailed the defendant's Mr McLean advising that she could do no more until access to the defendant's adjoining property was granted and the key to the gate was available. She then emailed Mr Godden and Mr Topliss, sending a copy of Mr Rowe's reply, and stated: "Until the keys to the gate leading up to Mr Rowe's property is forthcoming, there is nothing you or I can do about the assessment or clean up of the land on the north and west of the CMA site."

63 In the course of a telephone conversation on 10 May 2011, between one of the plaintiff's lawyers and one of the defendant's lawyers, the latter told the former that the defendant was willing to facilitate access for the Council and the consultant from GHD but objected to CMA also accessing the adjoining land.

64 On 12 May 2011, the plaintiff's lawyers wrote to the defendant's lawyers, with reference to the latter's letter to the plaintiff dated 28 April that contained the statement that it constituted a notice under s15(1). The plaintiff's lawyers wrote that without admission as to liability or as to any alleged breaches, the plaintiff was working to assess all issues raised in that letter. They said that given the nature and extent of the alleged breaches, the plaintiff would not be in a position to assess the allegations and make a response to the letter, including if appropriate, a timetable for completion of any rectification works by 14 May, which was the date specified in cl 3.2a) of the notice. The plaintiff's lawyers added that it was arguable that the specified time of 16 days was not a reasonable time for the purposes of s15(1) and stated: "In the circumstances, our client requires a further period of 7 business days from the date of this letter, in order to provide a response to your letter." They denied that the plaintiff was acting to repudiate the lease in failing to meet the unilateral requirement sought in cl 3.2 of that letter, or at all.

65 On Friday, 13 May, the defendant's solicitors replied with a refusal to agree to the requested extension of time.

66 In the statement of claim the plaintiff seeks in the alternative relief against forfeiture of the lease. In par19(c), it pleads that when the defendant terminated the lease (on 16 May), it did so in circumstances where the plaintiff had stated that it would comply with the demand in the notice that it provide to the defendant a timetable for completion of the Rectification Works referred to in the notice, but had asked for a short extension of that timetable, and was taking steps to remedy the breaches of the lease. In its defence, the defendant pleads that by reason of the plaintiff's admission in that pleading, the plaintiff is estopped from denying that the notice was invalid. That is no longer maintained.

67 At about 6am on Monday, 16 May, the defendant purported to terminate the lease, re-entered the premises and locked the plaintiff out. The defendant affixed on the premises a notice addressed to the plaintiff. It stated that as a consequence of the plaintiff's failure to comply with the notice dated 28 April to provide a timetable for rectification of breaches of essential terms of the lease to the satisfaction of the defendant within the 16 day period, the defendant gave notice that it had treated that failure as repudiation of the obligations of the plaintiff pursuant to the lease, and the defendant had accepted such repudiation, terminated the lease and re-entered into possession.

68 The reason given for the termination and re-entry was erroneous. There was no basis for claiming that the failure to provide a timetable for rectification of breaches was a repudiation of the plaintiff's obligations pursuant to the lease. Although the lease required the plaintiff to promptly repair damage in certain circumstances, it contained no obligation to submit a timetable for repairs.

69 That last point was made by the plaintiff's lawyers in a letter to the defendant's lawyers later on 16 May. They maintained that the re-entry was unlawful and that the defendant had acted unreasonably. They demanded that possession be returned to the plaintiff immediately.

70 Also on 16 May, the plaintiff's Mr Godden emailed the Council's Ms McLaughlin and advised that as the plaintiff was locked out of its premises it would find it difficult to comply with the amended EPN. Ms McLaughlin sent a reply the following day in which she said that she and Ms Lau were happy to work with the plaintiff in terms of timescales and were well aware of the issues being experienced by the plaintiff in trying to gain access to the site. She advised: "Since the outset CMA have cooperated with Council and kept us abreast of the issues on site. Please contact Council when any issues occur so that we can work with you to find a solution and remain aware of what's going on."

71 On 18 May, the plaintiff commenced this action. It sought a declaration that the re-entry was unlawful and ineffective to terminate the lease and an order that the defendant deliver up possession to the plaintiff. It also sought damages. Alternatively, it sought an order that it be relieved against the consequences of the forfeiture. It also filed an interlocutory application for an order that the defendant yield up possession to the plaintiff and for an injunction restraining the defendant from interfering with the plaintiff's possession until further order.

72 On 20 May, on the undertaking of the plaintiff that it would not do any structural, including concreting, work on the premises, an interim order was made by consent that until 24 May the defendant yield up possession of the premises to the plaintiff, and that the defendant be restrained from interfering with that possession. Thereupon, the plaintiff re-took possession.

73 On 27 May, the interlocutory application was part-heard by Wood J and adjourned for mention to 2 June. Upon the plaintiff giving the same undertaking, it was ordered once again that the defendant yield up possession of the premises until 3 June. The interlocutory hearing continued on 7 and 8 June and the judgment was reserved by Wood J. The interim order was renewed on both dates, upon the same undertaking being given by the plaintiff. On 17 June, Wood J published reasons for determining the interlocutory application. Upon the plaintiff giving the same undertaking that it would not do any structural, including concreting, work on the premises, it was ordered that until further order the defendant yield up possession of the premises the subject of the lease. That order remains in force.

74 It can be seen that since the re-entry by the defendant on 16 May, the plaintiff has been prevented from doing any structural work on the premises, including work on the fence, paving and concrete kerbing. Its undertaking that it would not do any such work was demanded by the defendant.

75 On 25 May, the Council withdrew the EPN it had issued to the plaintiff.

76 I accept the evidence of Mr Godden in his affidavit sworn on 22 June concerning what the plaintiff did following receipt of the letters dated 28 April from the defendant's solicitors and the amended EPN. It continued to work with consultants and with the Council in assessing the items raised in the report of build assess pty ltd and the amended EPN. Due to the nature of the works to be assessed, it was necessary to continue to reduce stock levels in order to access and assess other items such as the panel walls, pavers and pits.

77 After 29 April, the plaintiff continued to reduce stock levels, which allowed it and its consultants to have access to pits, pavers and walls to undertake assessment and repair work. It started operating in a more efficient way, storing less material on site and more quickly shipping material from the site. It emptied a number of the bays and reinforced one of them that needed it. It located the drawings for the boundary walls to assess the integrity of the walls and the way in which they were constructed. By 17 June a consultant to the plaintiff had prepared a draft waste management plan, which identified a number of areas where the plaintiff needed additional information, including the location of pits and interceptor traps before the waste management plan could be completed. It started drafting a Site Management Plan. It gave GHD further instructions to perform soil testing and prepare a Remediation Plan and structural engineering certification. It cleaned up the adjoining bakery site by removing the scrap metal from it.

78 On 10 May, a representative from David Naismith Engineers attended the site and inspected the pavers and panels walls. On 19 May a preliminary report was prepared by that firm. Their tentative view, without the benefit of soil testing, was that the fence had been designed for wind loading only and was unsuitable for having scrap metal stacked against it.

79 On about 12 May, Manion Plumbing attended the site to assess a pit at the rear. They reported that what had been thought to be interceptor pits were in fact manholes. It was a requirement of the EPN that interceptor traps and pits be cleaned and repaired by 30 June.

80 The plaintiff requested concreting companies to provide quotations for concreting works on the site. The quotations were received on 10 and 11 May. It was arranged that a concreter would be on site on 16 May to complete concreting works. However, the work was not done because at 6am that day, the defendant locked the plaintiff out of the property and thereafter, the plaintiff has been prevented from doing work of that kind by the undertaking it had to give in return for possession.

81 In a further affidavit of Mr Godden sworn on 19 July, he provided more up to date information. By 1 July the plaintiff had received quotations for the repair of the damage to kerbing and the picket fence. In June, Veolia Environmental Services pumped about 2000 litres of liquid waste from a sump near the Lindemann baler and shear to prevent waste leaking from the site. Stock levels were reduced to 861,462 kilograms by 30 June. The plaintiff had commissioned GHD to conduct soil testing on the site and the adjoining property to identify contamination and potential remediation plans.

Respects in which terms of the lease were breached by the plaintiff

82 The following findings concerning the lack of good repair and condition of the premises apply to all material times this year prior to the trial. The findings are predominantly, but not exclusively, based on the evidence of a building consultant and director of build assess pty ltd, Raymond Martin, who prepared reports on the condition of the premises on 24 April 2011 and 18 July 2011. The evidence of other witnesses supports the findings.

83 Structural failure and damage of concrete fence panels has occurred in many locations. Many of the panels have had pieces knocked out of them, particularly out of top edges. Many have been pushed outwards and have separated from the flanges of the steel uprights that helped to hold them in place. The panels at the rear corners of the premises have separated. The panels to the north of the crusher are leaning out dangerously. Cracking and crazing within individual panels has occurred. Five of the panels need to be replaced.

84 The cause of the damage to the fence was excessive stockpiling of scrap metal by the plaintiff against the fence. The build-up of stock required the fence to act as a retaining wall, for which its design was unsuitable. The fence was only designed to withstand wind and to contain dust and debris. It was not designed to retain stock. The damage to the top edge of panels was caused by impact in the course of handling heavy steel scrap.

85 Considerable damage has been caused to concrete pavers. Many pavers have been dislodged and uplifted. There are visible indentations and depressions and large sections which are no longer covered by concrete pavers. The cause was largely use by heavy equipment and lack of maintenance. Many paved areas need replacement.

86 Concrete kerbing and concrete sleepers at the western corner of the premises have been damaged by heavy machinery. A metal picket fence at the western corner has localised impact damage also.

87 In the first report, Mr Martin's preliminary estimate of the total cost of repairing all of that damage was $802,454.15. The most expensive item of repair concerns the paving, followed by the fence. The costs of repairing the kerbing, sleepers and picket fence will be relatively minor.

88 The evidence establishes that almost all of the damage, if not all, was caused during the currency of the lease. I find that the plaintiff breached cl 14.1(a) by failing to keep the premises in good repair and condition and cl 14.1(c) by failing to promptly repair damage to the premises caused by it. It also breached cl 14.7 by causing damage to the premises.

89 Evidence was given by a director of Geoton Pty Ltd, Mr Tony Barriera, concerning soil contamination on the premises and on the defendant's adjoining land. On 11 July 2011, 27 soil samples were taken, samples 1 - 13 from the defendant's adjoining land and samples 14 - 27 from the leased premises.

90 Sample 23, from the leased premises, with a reading of 520mg/kg, exceeded the recommended threshold level (450mg/kg) for total recoverable hydrocarbon aromatics. With a reading of 840mg/kg it also exceeded the threshold level (500mg/kg) for chromium. I find that the contamination was caused by the plaintiff and that the plaintiff breached cls 14.1(a) and 14.7 in regard to it. In addition, some samples exceeded certain levels for fill material classification.

91 Samples from the defendant's adjoining land contained total recoverable hydrocarbon in excess of the threshold level (in the case of sample 12) and total recoverable hydrocarbon aromatics in excess of the threshold level (in the case of sample 1). Some of the samples exceeded levels for fill material classification.

92 Mr Barriera's unchallenged evidence was that it may take six months to prepare remediation and waste management plans, take samples, examine the drainage system, laboratory test and analyse samples, and remove contaminated material. He was not asked to limit his estimate to what was necessary to remove what is contaminated on the leased premises with consequent reinstatement.

93 Clause 15.1(f) was also breached by the plaintiff by not delivering to the defendant a copy of the EPN and, I think, the amended EPN, immediately upon receiving it from the Council. That breach was an unwitting one because of a failure to realise that the lease required it. The defendant was promptly provided by the Council with a copy of the notice, no doubt because it was the complainant concerning the alleged pollution.

Did the provisions of s15(1) apply to the termination of the lease if the plaintiff had breached an essential term or had repudiated?

94 The defendant's case is that it terminated the lease in accordance with the common law and that it was not bound to comply with the provisions of the Conveyancing and Law of Property Act, s15(1). The defendant's arguments include:

1 The plaintiff breached a number of the clauses of the lease, such as cls 14.1 and 14.7, by failing to keep the premises in good repair and condition, failing to promptly repair damage to the premises caused by it and causing damage to the premises. It also breached cl 15(1)(d) by not delivering to the defendant a copy of the EPN immediately upon its receipt from the Council.

2 The plaintiff's breaches of cl 14.1 amounted to breaches of essential terms and therefore, to fundamental breaches of contract. They also amounted to a repudiation of its obligations under the lease.

3 On 16 May, the defendant terminated the lease in response. If through some defect in its notice of that date it did not terminate the lease effectively, it nevertheless did so by filing and serving on the plaintiff on 14 June its counterclaim, in which it also purported to terminate the lease and sought an order for possession.

4 The defendant's entitlement to terminate the lease came from general contract law principles that if one party to a contract breaches an essential term of it or repudiates its obligations under it, the other party may terminate the contract.

5 The presence of cl 17.3 in the lease, which gave the defendant a right to terminate for an event of default, did not prevent the defendant from exercising, or limit the exercise of, its common law right to terminate in response to the plaintiff's breach of essential terms and repudiation of the lease.

6 The restrictions and requirements imposed by the Conveyancing and Law of Property Act, s15(1), on the exercise of a right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant or condition in the lease, only applied to a right of re-entry or forfeiture under a proviso or stipulation in the lease, and did not apply to a common law termination by a lessor for breach of an essential term or repudiation.

95 By cl 17.1 of the lease, cl 14.1, which it is clear the plaintiff breached in material ways, is declared to be an essential term of the lease. It is the defendant's case that the breach of that essential term amounted to both a fundamental breach of contract and a repudiation of the lease by the plaintiff, that the defendant terminated the lease by re-entry under its common law right to do so, and that it did not have to base its termination on a right given by the lease.

96 The provisions of s15(1) are limited in their application to the exercise of "a right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant or condition in the lease", other than a right of re-entry or forfeiture for non-payment of rent. See s15(7). Further, the provisions have effect notwithstanding any stipulation to the contrary in the lease. See s15(8).

97 A landlord may have a right to terminate a lease for the tenant's default under a term of the lease that provides for that right, commonly one of re-entry and forfeiture. The derivation of that right to terminate is to be found in the terms of the lease. When a lease gives that right it falls squarely within the opening words of s15(1) and its exercise is governed by the subsection.

98 But a landlord may also have a right to terminate a lease under general contract law principles that if one party to the contract breaches an essential term of the contract or repudiates its obligations under the contract, the other party may terminate it. That was made clear in Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17, where it was held that as a general rule, the ordinary principles of contract law, including those of termination for fundamental breach or repudiation, apply to leases. It was argued in that case that an express proviso for re-entry in a lease excluded any common law right to terminate. Mason J, with whom Dawson J agreed and Wilson and Deane JJ generally agreed, concluded at 29-30 that re-entry under such a proviso is essential only where the parties have stipulated that common law rights to terminate are excluded. The mere presence of a proviso in a lease giving an express power to terminate does not exclude the exercise of such common law rights as may otherwise be appropriate, and the landlord may be entitled to rely upon both the contractual and the common law right to terminate. Deane J at 55. Nevertheless, it is open to the parties by their contract to regulate the exercise of the common law power. Mason J at 30; Deane J at 55 - 56.

99 Progressive Mailing was followed and applied by the Victorian Court of Appeal in Apriaden Pty Ltd v Seacrest Pty Ltd [2005] VSCA 139; (2005) 12 VR 319. Williams AJA, with whom the other members of the court agreed in substance, held that the common law contractual doctrine of repudiation provided an additional means by which an innocent party could terminate the lease there under consideration, without a separate need for termination in accordance with a provision for re-entry in the lease, nor compliance with a statutory provision equivalent to s15.[1]

100 Counsel for the defendant relied on Apriaden Pty Ltd v Seacrest Pty Ltd and he made the point that the case was followed in Natwest Markets Australia Pty Ltd v Tenth Vandy Pty Ltd [2008] VSCA 207; (2008) 21 VR 68. That is correct, but only to the extent that the Court of Appeal held that a provision in a lease for re-entry without notice for failure to pay rent could be relied upon, notwithstanding that another provision also provided for a remedy for failure to pay rent upon the giving of notice. But the applicability of the provisions of the Victorian section equivalent to s15 did not arise because the case concerned a breach of a covenant to pay rent and not a breach of other covenants. See Natwest at par[34].

101 The plaintiff's counsel relied instead on the decision of the Court of Appeal in World Best Holdings Ltd v Sarker [2010] NSWCA 24 and the decision of a differently constituted Court of Appeal six months later in Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268. In World Best, Handley AJA, with whom Tobias and Campbell JJA agreed, considered the termination of a lease by a landlord by means of a notice that did not comply with the New South Wales Conveyancing Act 1919, s129(1). The notice asserted that the tenant had repudiated his obligations under the lease by failing to comply with two of the lease's clauses, 20.2 and 33.1. They related to obligations of the tenant to fit out the leased premises in a certain way for a shop. Clause 24.1 of the lease provided that the tenant's obligations under cl 20 were "essential terms of this lease", which is what cl 17.1 of the lease in this case provided concerning cl 14.1. Clause 24.2 provided:

"24.2 We may end this lease by giving you notice or by re-entry if you:

(a) repudiate your obligations under this lease;

(b) do not comply with an essential term of this lease ..."

An Administrative Appeals Tribunal found that the tenant had breached his covenants relating to the fit-out, which were fundamental or essential terms because that was what the parties had agreed in clause 24.1. But it was also found that the tenant had not repudiated the lease, because there was no evidence that he had "evinced an intention no longer to be bound by the contract, or to fulfil it only in a manner substantially inconsistent with his obligations". Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620 at 625 - 626.

102 At par[32], Handley AJA accepted the authority of Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17 that the ordinary principles of contract are applicable to contractual leases. At par[33], he also accepted that if either party to a lease repudiated its obligations under the lease, the innocent party was entitled to accept the repudiation and terminate the lease under those contractual principles without complying with s129(1), referring to Apriaden Pty Ltd v Seacrest Pty Ltd (supra).

103 However, his Honour concluded at pars[42] - [43] that there was a material difference between a termination for repudiation and a termination for fundamental breach that did not amount to a repudiation. That was a difference not raised in Apriaden. He said that s129(1) applied where a landlord wished to terminate a lease, using the terms of s129(1), "for a breach of any covenant, condition, or agreement ... in the lease", and held that while a repudiation did not fall within that language, breaches of contract or covenant, falling short of repudiation, did fall squarely within it. Referring to the provisions of subs(10), that s129 had effect notwithstanding any stipulation to the contrary, which is what subs(8) of s15 of the Act of this State provides, Handley AJA concluded at par[44] that a landlord could not contract out of s129(1) by making any or all of the tenant's covenants essential terms, and providing that any breach or fundamental breach thereof would give rise to a right of termination. Because the notice of termination being considered in that case did not comply with s129, it was held to be invalid and of no effect.

104 For those reasons, Handley AJA declined to apply the dicta of Meagher JA, which was approved by Powell JA, in Marshall v Council of the Shire of Snowy River (1994) 7 BPR 14,447 at 14,457 that:

"... a lease being a contract, where 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 ... to be the innocent party, will have two rights: first, a contractual right to terminate the lease by re-entry for breach of covenant ... 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 s129 of the Conveyancing Act before re-entry; if, as here, he relies on the latter right, s129 becomes an irrelevance."

105 Marshall was referred to with approval in Apriaden, but Handley JA in World Best said that it was referred to only for the proposition that a landlord may terminate for repudiation without complying with s129(1) or its equivalent. As I have already observed, although strictly that may be so, Williams AJA did not mention a distinction of that kind.

106 It seems to me that World Best should be regarded as a doubtful authority. When relying on the undoubted fact that breaches of contract or covenant, falling short of repudiation, fell squarely within the expression "a breach of any covenant, condition or agreement ... in the lease" in s129(1) (and s15(1) of the Act I am considering) Handley JA appears to have overlooked the opening words of the section, which cannot be ignored. In full, the subsection provides that "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", except as the subsection provides. Although the landlord in World Best purportedly terminated as a consequence of breaches of fundamental or essential terms that were in the lease, as his Honour pointed out, it claimed that it did not terminate under a right of re-entry of the kind specified in s129(1), that is a right of re-entry or forfeiture under any proviso or stipulation in the lease, but under a right to do under the common law.

107 However, World Best was followed in Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (supra), in which the opening words of the section were not overlooked. The principal judgment was written by Hodgson JA. Allsop P and Macfarlan JA agreed with it. The judgment considered many documents, one of which was a car park lease. Its cl 16.1 was similar in effect to cl 17.1 in this case. It provided that a tenant's obligations under cls 5, 7, 10 and 11 were essential terms of the car park lease. Its cl 16.4(a) and (b) declared that an event of default occurred if the tenant repudiated its obligations under the lease or did not comply with an essential term of the lease. That declaration was to the same effect as cl 17.2(a) here, which declares that an event of default occurs if the tenant repudiates (cf cl 16.4(a) of the car park lease in Macquarie) or commits a fundamental breach of the lease (cf cl 16.4(b) of the car park lease).

108 In Macquarie's car park lease, cl 16.3 gave to the landlord a right to terminate it by giving the tenant notice, by re-entry or by converting the lease by notice into a tenancy at will, if an event of default occurred. However, by cl 16.5, the landlord was prohibited from exercising its power under cl 16.3, unless it first gave the tenant notice of the particular event of default on which the landlord relied, in which case the tenant had certain rights under cl 16.6. The landlord gave the tenant a notice of default pursuant to cl 16.5. The notice simply identified the events of default the landlord asserted had occurred. It did not do what the Conveyancing Act (NSW), s129(1), required, if it applied, by either requiring the tenant to remedy the breaches or requiring compensation in money for them. Subsequently, the landlord gave the tenant a notice terminating the car park lease. An issue that arose for determination was whether the landlord had to comply with s129(1) before terminating the lease, or whether instead the landlord was entitled to terminate it by re-entry under the general law of contract without regard to s129(1).

109 Hodgson JA followed what was held in World Best. At par[296] he said that World Best proceeded on the assumption that there is a distinction between fundamental breaches of contract (which entitle the other party to terminate) and repudiation of a contract (which entitles the other party to terminate by accepting the repudiation). While some fundamental breaches might amount to repudiation because they manifest unwillingness or inability to render substantial performance of the contract, other fundamental breaches might not do so. His Honour held that where a landlord terminates for breach of an obligation agreed by the parties in the lease to be essential, but the breach does not amount to repudiation in the common law sense he had just explained, a retaking of possession would be an exercise, in the terms of New South Wales' s129(1), of 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".

110 Hodgson JA then went on to consider the situation should the event of the tenant's default amount to repudiation of its obligations under the lease. Upon a consideration of the comprehensive provisions of cl 16 of the car park lease, and particularly its provisions concerning the rights of the parties in the event of repudiation, his Honour concluded that the parties had manifested an intention that the general law right of termination by acceptance of repudiation was also excluded, and that only the provisions of the clause applied. It followed that a right of termination both by reason of repudiation and fundamental breach fell within the opening words of s129(1) and that a default notice had to comply with it.

111 I should not depart from a decision of an intermediate appellate court in another jurisdiction unless I think it plainly wrong or this case is exceptional. CAL No 14 Pty Ltd v Motor Accidents Insurance Board [2009] HCA 47; (2009) 239 CLR 390 at pars[48] - [51]. Counsel for the plaintiff submitted that I should follow the decisions of the New South Wales Court of Appeal in World Best and Macquarie. Counsel for the defendant submitted that I should not do so and that instead I should follow the Full Court of Victoria in Apriaden. The response of counsel for the defendant to that was that Apriaden was distinguishable.

112 I am compelled to follow an authority more superior to both of those courts, the High Court in Progressive Mailing House Pty Ltd v Tabali (supra). It is binding on me for the propositions that termination of a lease under a provision contained in it is only essential where the parties have stipulated that common law rights to terminate under ordinary principles of contract law are excluded, that the mere presence of a provision in a lease of an express power to terminate does not exclude the exercise of such common law rights as may otherwise be appropriate, and that a landlord may be entitled to rely upon both the contractual and the common law rights to terminate. Applying those propositions, it becomes necessary to consider the relevant provisions in the lease, in particular cls 17.1, 17.2 and 17.3, and determine whether the parties stipulated that any common law rights to terminate the lease were excluded. I find that they did not do so for the following reasons.

113 They did not stipulate it. To the contrary, they agreed that the plaintiff's obligations in some of the clauses, such as cl 14.1, were essential terms. When parties to a contract agree that a term is essential it usually amounts to an agreement that the term goes to the root of the contract so that if it is breached, the innocent party may regard it as a fundamental breach and terminate the contract without notice. Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115 at par[47]; Shevill v Builders Licensing Board (supra) at 626 - 627; Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd [2008] HCA 10; (2008) 234 CLR 237 at par[58]; Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 at par[128]. The provisions of cl 17.1 that certain of the tenant's obligations are essential terms, seem to serve no purpose other than the preservation of the right under common law to terminate for breach of an essential term.

114 Further, if the parties had intended that rights under common law were excluded, there would have been no need to refer to essential terms at all, and there would have been no need for cl 17.2 to have mentioned repudiation or commission of a fundamental breach as an event of default. A simple reference to all obligations under the lease was all that was necessary.

115 The words of cl 17.3 demonstrate that it was in the contemplation of the parties that circumstances could arise where the defendant would be entitled to terminate the lease by re-entering the premises without notice. They recognised that would not be the case if s15(1) applied, thereby accepting that there would be some situations when it did apply and some when it did not.

116 It would have been a simple matter of drafting to expressly provide that there could be no re-entry or forfeiture for breach of a term of the lease other than under a proviso or stipulation in the lease, or that rights under ordinary principles of contract law were excluded. No such stipulation was made.

117 For those reasons, I hold that the provisions of s15(1) did not apply to a termination of the lease by the defendant in response to a breach of an essential term of the lease or repudiation by the plaintiff.

118 It follows that the defendant was entitled to terminate by re-entering without notice on 16 May in response to the plaintiff's fundamental breaches of the lease, in particular breaches of cl 14.1. In due course I will consider whether the plaintiff's conduct also amounted to repudiation and as a consequence, the defendant had a right to terminate in response to that repudiation.

119 I will deal with some submissions concerning the consequences if s15(1) had applied. The subsection provides that following service of the required notice on the lessee, the lessor may exercise the right of re-entry or forfeiture if the lessee fails, within a reasonable time thereafter, to remedy the breach, if it is capable of remedy. The defendant re-entered on 16 May, which was 18 days after the date of the notice of 28 April, and 17 days after it was received.

120 The first argument for the defendant was that 14 days amounted to a reasonable time because that was the time to which the parties agreed in the closing lines of cl 17.3. What they provided was that if s15(1) applied, "the Landlord may only terminate this lease if the Landlord has first given to the Tenant a notice which complies with that section and the Tenant has failed to comply with that notice within fourteen (14) days."

121 Counsel for the defendant submitted that it was open to the parties to agree in the lease as to what amounted to a reasonable time for the purposes of the subsection. He submitted that the provision in cl 17.3 to which I have just referred, amounted to an agreement that 14 days was a reasonable time for the purposes of the subsection.

122 I do not accept the submission. My interpretation of cl 17.3 is that it requires, at the very least, 14 days to expire following the notice before the landlord may terminate. There is nothing in cl 17.3 which provides that the specified period of 14 days amounts to a reasonable time for the purposes of the subsection. Further, because of s15(8), the requirement of a reasonable time prevails over any agreement of the parties. What amounts to a reasonable time depends on the gravity of the breach and the time it may reasonably take to remedy. There could not be one time, such as 14 days, that would amount to a reasonable time for all circumstances.

123 Counsel for the defendant relied on an unreported decision of Adam J in the Victorian Supreme Court in Re Automotive & General Industries Ltd, 1 May 1970. Considered was the Property Law Act 1958 (Vic), s146(1), which in some respects was similar to s15(1), but in a material respect was different. Counsel submitted that a statement of Adam J at 30 of his judgment carried with it a conclusion that by a lease the parties may bind themselves by agreeing that a particular period, in that case 14 days, amounted to a reasonable time for the purposes of s146(1). Such a conclusion may have been correct for the purposes of s146(1), but not for the purposes of s15(1) of the Act of this State. Section 15(1) requires that the tenant have a reasonable time. By s15(8), the lease cannot stipulate to the contrary. However, the Victorian s146(1) provided for either "a reasonable time" after service of the notice or "the time not being less than 14 days fixed by the lease to remedy the breach". The statement of Adam J was made with reference to that express provision of s146(1) that the parties could agree on the relevant period of time in the lease.

124 Counsel for the defendant also relied on Penton v Barnett [1898] 1 QB 276 where one of the three members of the Court of Appeal, Rigby LJ, said at 280 that it could not be doubted that the time of three months specified in a notice under a statutory provision equivalent to s15(1) was a reasonable time under the provision, for it was the time specified in one of the covenants to repair, which required the tenant to repair within three months after a notice was given. That statement can only be regarded as a finding of fact concerning what amounted to a reasonable time for the purposes of the statutory provision. The statutory requirement remains one of reasonable time and nothing else.

125 Finally, concerning authorities relevant to this topic, counsel for the defendant relied on a statement of the trial judge quoted on appeal by Hodgson JA in Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (supra) at par[303], that a time specified in cl 16.6 of the lease there under consideration was to be understood as the time which the parties agreed was reasonable and, in the trial judge's opinion, should be accepted as a reasonable time for the purposes of the Conveyancing Act (NSW), s129(1). Clause 16.6 relevantly provided for a breach to be remedied within a reasonable time and in any event, within three months of an undertaking being given by the tenant to remedy the breach, which undertaking was required to be given within 28 days of the service of a notice by the landlord. In other words, at least three months, and possibly almost four months, were provided by the agreement for remedying a breach. The trial judge thought that to be a reasonable time for the purposes of s129(1). But what was said is not an authority for the proposition that as a matter of law parties may agree in a lease that a particular time shall amount to what is a reasonable time for the purposes of the statute. An agreement of that kind would conflict with s15(8) or its equivalent.

126 The next submission of counsel for the defendant was that s15(1) only requires a reasonable time from service of the notice to "remedy" breaches of covenants and conditions and that some of the plaintiff's breaches cannot be remedied but instead, will require parts of the premises to be replaced. Counsel submitted that the word "remedy" refers to repair and does not extend to the necessary replacement of some of the panels of the concrete fence, some of the paving and some of the soil that was contaminated. Counsel should have included some of the concrete kerbing which had been fractured and, I think, the metal picket fence, for the repair of which new materials are likely to be required for the damage to be appropriately addressed.

127 I reject the submission. A breach of a covenant to repair will be remedied by carrying out the repairs. In most cases, the carrying out of repairs will involve the supply of new materials to some extent, following which the relevant breach will have been remedied. For example, if a window is broken, its repair requires a new pane of glass. Once the broken pane has been replaced, any failure to repair the window will have been remedied. I observe that the defendant's notice of 28 April required the plaintiff to repair the damage to the premises identified in the report of build assess pty ltd.

128 It was also submitted by counsel for the defendant that the requirements of the notice were severable, so that one failure to remedy a breach within a reasonable time after service of the notice was sufficient to justify a valid re-entry. While appearing to accept that it would have taken far longer than 18 days to remedy most of the breaches, for example by repairing the walls and the paving, and rectifying any contamination of soil, counsel for the defendant argued that a reasonable time for the plaintiff to remedy its failure to repair the concrete kerbing and the metal picket fence did not exceed 18 days.

129 Counsel relied on the evidence of Mr Godden that subject to weather being fine and to a contractor being available, the damaged concrete kerbing could be repaired within 16 days of the work commencing. He gave similar evidence concerning the damage to the metal picket fence. However, I interpret Mr Godden's estimates as applying only to the carrying out of the work itself from the time of its commencement. It did not include the time it may take to obtain quotations for the work and, as Mr Godden indicated, the selected contractor being available and the weather being fine. Further, as counsel for the defendant pointed out (with regard to Mr Godden's evidence that he had booked a concreter to complete concreting work on the property on 16 May but the work was prevented by the defendant's re-entry), cl 14.8(b) required that before any building work was carried out, the plaintiff first had to obtain the defendant's approval of plans and specifications for the work. I find that 18 days was not a reasonable time for remedying the breaches of covenant in respect of the damaged kerbing and picket fence.

130 It is unnecessary to consider the argument that severability of the requirements of the notice may be allowable. However, I mention cl 24.2(b) of the lease, which provides that in the case of a posted letter, which is what the notice was, it is to be taken to be received on the third business day after posting. If that operated, its effect is that the notice of 28 April is to be taken as received on Tuesday, 3 May, only 13 days before the defendant re-entered. Neither counsel addressed argument concerning that. Mr Godden's evidence was that he received the notice on 29 April, 17 days before the re-entry.

131 Another submission of counsel for the defendant was that all the notice specifically required of the plaintiff within 16 days of its date was the submission of a timetable for completion of the necessary repairs. The submission has no merit, for what s15(1) required was that the plaintiff have a reasonable time to remedy the breaches of covenant before the defendant was entitled to re-enter or forfeit. That the defendant offered to accept a timetable, and a variation of the lease, is irrelevant to whether it was prohibited by the s15(1) from terminating the lease.

Did the defendant terminate the lease under contract law for breach of an essential term?

132 There is no doubt that the plaintiff's breaches of cl 14.1 amounted to breaches of essential terms. The agreement of the parties in cl 17.1 that cl 14.1 was an essential term made it one. I cited authorities for that proposition earlier. Their agreement amounted to "a stipulation which the parties have agreed either expressly or by necessary implication ... as a condition which goes to the root of the contract so that any breach of that term may at once and without further reference to the facts and circumstances be regarded by the innocent party as a fundamental breach". Suisse Atlantique Socieèteè d'Armement Maritime SA v N V Rotterdamsche Kolen Centrale [1967] 1 AC 361 at 422.

133 For the plaintiff's breaches of that essential term, the defendant was entitled by the common law to terminate the lease without notice. Counsel for the plaintiff did not argue that is not the position at common law. His argument, which I have rejected, was limited to reliance on cl 17.3 of the lease and the application of s15(1) to this case.

134 It follows that the defendant was entitled to terminate the lease by re-entry, which it did on 16 May.

135 I accept the submission of counsel for the defendant that if for some reason it failed to terminate the lease on 16 May, it did so when it filed and served its counterclaim on 14 June, in which it purported to terminate the lease and sought an order for possession. Moore v Ullcoats Mining Coy Ltd [1908] 1 Ch 575 at 584; Canas Property Co Ltd v K L Television Services Ltd [1970] 2 QB 433 at 442; Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW Ltd (1970) 2 BPR 9562; Lidsdale Nominees Pty Ltd v Elkharadly [1979] VicRp 10; [1979] VR 84 at 90 - 91; Billson v Residential Apartments Ltd [1991] UKHL 7; [1992] 1 AC 494 at 534. Counsel for the plaintiff did not challenge the authority of those cases.

Did the plaintiff terminate the lease under contract law in response to the plaintiff's repudiation of its obligations under the lease?

136 If the plaintiff repudiated its obligations under the lease, the common law entitled the defendant to accept the repudiation and terminate the lease without notice. Counsel for the plaintiff did not argue against that. His first argument was that cl 17.3 of the lease regulated what the defendant was entitled to do in response to repudiation and the defendant was obliged to conform with the provisions of s15(1), an argument I have rejected. His second argument was that the plaintiff's conduct did not amount to repudiation of its obligations.

137 It was submitted by counsel for the defendant that breach of an essential term of a contract amounts to both a repudiation and a fundamental breach of the contract. In support he cited Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17 at 30, Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620, Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd [2008] HCA 10; (2008) 234 CLR 237, Chan v Cresdon Pty Ltd [1989] HCA 63; (1989) 168 CLR 242 and Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623.

CMA Recycling Victoria Pty Ltd v Doubt Free Investments Pty Ltd [2011] TASSC 71

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Judgment (243 paragraphs)

CMA Recycling Victoria Pty Ltd v Doubt Free Investments Pty Ltd [2011] TASSC 71 (21 December 2011)

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Legislation Cited (2)

Cases Cited (13)