Dee Vine Group Pty Ltd v Palais Reception Centre Pty Ltd

Supreme Court of NSW|2019-10-22|Before: Kunc J

Summary

The Albert Palais (the "Premises") has stood in Catherine Street, Leichhardt since 1934. Originally a dance hall, it is now a "reception centre".
By a sub-lease dated 11 July 2017 (the "Sub-Lease") the defendant, Palais Reception Pty Ltd ("Palais") sub-lets the Premises to the plaintiff, Dee Vine Group Pty Ltd ("Dee Vine").
These proceedings are an application by Dee Vine against forfeiture of the Sub-Lease based upon Dee Vine's non-payment of rent and other alleged non-monetary breaches.
For the reasons which follow, the Court is satisfied that relief against forfeiture should be granted, albeit on strict terms.
Mr D Weinberger of Counsel appeared with Mr A Jordan of Counsel for Dee Vine. Mr M Dawson of Counsel appeared with Mr D Elliott of Counsel for Palais.

The dispute

The circumstances which have given rise to these proceedings were not in controversy.
On 26 September 2019, Palais served a notice dated 12 September 2019 on Dee Vine pursuant to s 129 of the CA (the "Notice"): "NOTICE OF BREACH OF COVENANT To: Dee Vine Group Pty Ltd XXX Ryde, NSW 2112 RE: 2 CATHERINE STREET, LEICHHARDT With reference to the Sub-Lease of the abovementioned Premises dated 11 July 2017 between Palais Reception Centre Pty Ltd ACN. 083 333 760 ("Palais Reception") to Dee Vine Group Pty Ltd ACN. 616 768 195 ("Dee Vine") and the covenants by the Sub-Lessee therein contained as follows Dee Vine is in breach of the obligations under the Sub Lease as follows: Covenant breached Particulars of breach
Pursuant to item 5 of Annexure One to the Sub-Lease Dee Vine was to provide a Bank Guarantee in the sum of $160,000.00 on or before 12 months after the commencement date of the Sub-Lease By the failure to provide a Bank Guarantee in the sum of $160,000.00 on or before 12 months after the commencement date of the Sub-Lease
Under covenant 6.03 of registered memorandum A XXX ("Registered Memorandum"), which forms part of the Sub-Lease, where there is any alteration in the beneficial ownership in the share capital of Dee Vine which alters the effective control of Dee Vine from that which existed at the date of the Sub-Lease then a deemed assignment of the Sub-Lease has occurred and consent of Palais Reception is required pursuant to covenant 6.02 of the Registered Memorandum. By its failure to obtain the consent of Palais Reception to the deemed assignment do so Dee Vine has breached its obligation under the Sub-Lease
Pursuant to covenant 2.01 of the Registered Memorandum and Item 3 of Annexure 1 to the Sub-Lease, the Premises are only to be used as a Reception Centre. By the use of the Premises as a night club venue or other than as a reception centre.
Pursuant to covenant 2.03(b) of the Registered Memorandum the Sub Lessee is not to permit to be done anything which is, will or, may be an annoyance, nuisance or disturbance to other Tenants in the Building or to the owners or occupiers of adjacent Premises By the loud and excessive music and noise generated and emanating from the Premises resulting in numerous complaints.
Pursuant to covenant 19.13 of the Registered memorandum, the Sub Lessee is to remove all trade waste, garbage and refuse from the Premises. By the failure remove all trade waste, garbage and refuse from the Premises resulting in numerous complaints.

Palais Reception hereby requires you to remedy the above breaches by: 1. Provide a provide a [sic] Bank Guarantee in the sum of $160,000,00, within 21 days. 2. Remedy the unauthorised assignment of the Sub-Lease by taking such steps as may be required to restore beneficial ownership in the share capital of Dee Vine to that which existed at the date of the Sub-Lease, within 21 days. 3. Ceasing to use the Premises other than for the approved use being a reception centre; 4. Ceasing the playing of loud and excessive music from the Premises; and 5. Regularly removing all trade waste, garbage and refuse from the Premises and building. Dated: 12/9/2019 (sgd)………………………… Director Palais Reception Centre Pty Ltd ACN 083 333 760 Note: The Sub-Lessor will be entitled to re-enter or forfeit the Lease in the event of the Lessee failing to comply with this Notice within a reasonable time - see section 129 of the Conveyancing Act 1919."

On 22 September 2019, by a notice of that date, Palais determined the Sub-Lease and purported to re-enter the Premises for non-payment of rent: "RE: 2 CATHERINE STREET, LEICHHARDT With reference to the Sub-Lease of the abovementioned Premises dated 11 July 2017 between Palais Reception Centre Pty Ltd ACN 083 333 760 ("Palais Reception") to Dee Vine Group Pty Ltd ACN 616 768 195 ("Dee Vine") and the covenants by the Sub-Lessee therein contained as follows Dee Vine is in breach of the obligations under the Sub Lease as follows: Under Pursuant [sic] to item 1 of Annexure One to the Sub-Lease, Dee Vine must pay the rent in advance on the 7th day of each calendar month. Accordingly rent for month commencing on 7 September 2019. Dee Vine has failed to do so. Pursuant to covenant 3.05 (a) of the registered memorandum AI XXX ("Registered Memorandum"), which forms part of the Sub-Lease, where the rent reserved by the Sub-tenant under the Sub Lease will at any time be in arrears or unpaid for fourteen dates after the due date (whether demand be made or not) then without prejudice to any other right or remedy in respect of the breach or non-observance of the provisions of the Sub-Leas(sic), Palais Reception may re-enter into possession of the premises and thereby determine the Sub-Lease. Having failed to pay the monthly rent for the above which fell due for payment on 7 September 2019, Palais Reception hereby demands the immediate possession of the above premises so as to effect re-entry of the premises and determine the Sub Lease. Dated: 22 September 2019"
Dee Vine commenced these proceedings by a summons filed in Court on 26 September 2019 which included: "1. Leave to the plaintiff to file this Summons and Affidavit of Raymond David Perkes made 26 September 2019 in Court. … 3. Until further Order, Order that the Defendant, Palais Reception Centre Pty Ltd, be restrained from evicting or locking out the Plaintiff, Dee Vine Group Pty Ltd, or otherwise re-entering the premises at 2 Catherine Street, Leichhardt NSW 2040 known as The Albert Palais Reception Centre (the "Premises"). … Final Relief 6. Order that the Defendant, Palais Reception Centre Pty Ltd, be permanently restrained from evicting or locking out the Plaintiff, Dee Vine Group Pty Ltd, or otherwise re-entering the premises at 2 Catherine Street, Leichhardt NSW 2040 known as The Albert Palais Reception Centre (the "Premises")."
The affidavit in support of the summons was sworn by Dee Vine's solicitor, Mr Perkes, on 26 September 2019 and included: "7. At pages 51 to 53 of Exhibit "RDP-1" is a copy of a letter from the Defendant's lawyers Diamond Conway Lawyers dated 16 September 2019 serving on the Plaintiff a Notice of Breach of Covenant dated 12 September 2019. I am informed by Mr Simon Elias, the sole director of the Plaintiff that the Plaintiff has made arrangements to provide to the Defendant the further Bank Guarantee in the sum of $160,000.00 on or before the expiration of the 21 day period provided in the Notice, and also that on 14 September 2019 Mr Elias met with representatives of the Office of Liquor and Gaming and undertook and agreed with them that no night time functions would be held at the Premises in the future. 8. The Premises are primarily used for weddings and as a wedding reception venue. The following is a list of the functions to be held at the Premises in the next three months, each of which has paid a holding deposit to the Plaintiff; (a) 28th September 2019 - Lo Ricco Wedding (b) 4th October 2019 - 70's night (midnight finish) (c) 5th October 2019 - 80's night (midnight finish) (d) 6th October 2019 - Natalie wedding (e) 12th October 2019 - Jansen Engagement (f) 19th October 2019 - Branka Wedding (g) 8th November 2019 - school 4 Dance Xmas party (h) 9th November 2019 - Moses 21 st (i) 22nd November 2019 - Finch wedding (j) 23rd November 2019 - Astrid Boxing (k) 30th November 2019 - Alesha wedding (l) 7th December 2019 - Amanda 21st (m) 13th December 2019 - Hussein Boxing (n) 14th December 2019 - Bianca Wedding (o) 20th December 2019 - Xmas party Tristar 9. At pages 54 to 60 of Exhibit "RDP-1" are copies of the contracts for bookings for wedding receptions booked for the Premises on 28 September 2019 and 6 October 2019. If those functions and all other pre-booked events have to be cancelled as a result of the Plaintiff being denied access to the Premises, not only will the Plaintiff suffer financial hardship, but all of the weddings and receptions will be thrown into considerable disarray."
The ex parte orders Darke J made on 26 September 2019 included: "3. Upon the condition that the plaintiff pay, by delivery of a bank cheque to the defendant's solicitors Diamond Conway the sum of $21,083.35 by 5:30pm today, orders that the defendant take such steps as are necessary to restore possession of the premises at 2 Catherine Street, Leichhardt NSW 2040 and known as The Albert Palais Reception Centre to the plaintiff forthwith and in any event by no later than 1 0:00am on 27 September 2019;"
When the matter returned to Court on a contested basis on 30 September 2019, Darke J made orders which included: "1. THE COURT ORDERS that upon the Plaintiff by its Counsel giving to the Court: (a) the Usual Undertakings as to Damages; and (b) the Undertakings set out in schedule A to these orders, the Defendant by itself its servants or agents be retrained from taking any steps to enforce Notice of Determination of Lease dated 22 September 2019 in respect of the premises situate at 2 Catherine Street, Leichardt, NSW 2040 and known as 'The Albert Palais Reception Centre' (Premises) until 5pm on 18 October 2019. 2. THE COURT NOTES that the consent of the Defendant to the making of these orders is without admission by the Defendant and does not affect the Plaintiff's burden in seeking the interlocutory or final relief sought in the Summons. … Schedule A 1. The plaintiff undertakes to comply (to the extent that compliance has not already occurred) with its obligations under the Sub Lease and in particular: a. To provide to the defendant With a bank guarantee in the sum of $160,000 in accordance with item 5 of Annexure One of the Sub-Lease by October 2019; b. To comply with covenant 6.03 of the Registered Memorandum by restoring the beneficial ownership in the share capital of the plaintiff to that which existed at the date of the sub lease by 2 October 2019; c. To comply with the permitted use of the Premises only as a reception centre pursuant to covenant 2.01 of the Registered Memorandum and item 3 of Annexure 1 to the Sub Lease; d. To comply with covenant 2.03(b) of the Registered Memorandum by not permitting anything to be done at the Premises which is or will or may be an annoyance, nuisance or disturbance to other Tenants or the occupiers of the Building or the owners or occupiers of any adjacent premises; e. To comply with covenant 19.13 of the Registered Memorandum by removing all trade waste, garbage and refuse from the Premises. 2. In this Schedule A: a. "Building" has the meaning set out in clause 20.01 of the Registered Memorandum; b. "Premises" means the premises at 2 Catherine Street, Leichardt, NSW 2040 and known as The Albert Palais Reception Centre; c. "Registered Memorandum" means Registered Memorandum AI XXX which forms part of the Sub Lease; d. "Sub Lease" means the sub-lease of the Premises from the plaintiff to the defendant commencing on 7 August 2017; e "Tenants" has the has the meaning set out in clause 20.01 of the Registered Memorandum."
His Honour also provisionally listed the matter for final hearing before me on 18 October 2019. For reasons it is unnecessary to record, the final hearing ultimately took place before me on 22 October 2019.
While the matter was being prepared for hearing, and notwithstanding the undertakings given by Dee Vine through its Counsel to the Court on 30 September 2019 (see paragraph [30] above), Dee Vine permitted a hip hop concert to take place at the Premises on Saturday, 5 October 2019 (the "5 October event").
A police report concerning the 5 October event was in evidence before me and included: "… The venue hosted an event publicised as a hip hop concert showcasing the band "HP Boyz". The event was previously booked to occur at The Arthouse, Sydney, however the event was cancelled by this venue citing capacity issues as the cause … The event commenced at 9.30pm and concluded at 2.00am, 700 ticketed patrons attended. There were 4 bar staff, 11 security guards, 4 RSA marshalls (one stood down due to missing RSA). The hour prior to the event a meeting was held with the venue manager, ELIAS, to confirm security and alcohol management for the event."
There was no dispute that the rent due pursuant to the Sub-Lease has been paid for September and October 2019 and that the next payment of rent is due on 7 November 2019.

Mr Elias' evidence

It is convenient at this point to deal with Mr Elias' evidence, who was the only witnessed cross-examined in the hearing.
Mr Elias was not challenged, and I accept, the evidence in his affidavit sworn 18 October 2019 that garbage from the Premises is now sorted and put in bins in the basement room nominated by Palais and is collected on a regular weekly basis each Thursday.
In the same affidavit, Mr Elias stated that: "The shares in [Dee Vine] have been transferred from me back to Jitinder Singh Bhogul, as evidenced by the ASIC current organisation extract in relation to [Dee Vine]" which was in evidence. The ASIC extract records Mr Bhogul as the owner of all of the shares in Dee Vine and refers to a "Change to Company Details, Changes to Members Shareholdings" form with an effective date of 30 September 2019. Mr Dawson submitted that there was no evidence that Mr Bhogul had consented to the shares being returned to him. However, Mr Dawson did not put to Mr Elias in cross-examination that the shares had not been transferred back to Mr Bhogul. In the circumstances I am satisfied that the entire issued share capital in Dee Vine has been transferred back to Mr Bhogul.
In relation to the bank guarantee, Dee Vine had not complied with its undertaking to the Court to provide the additional bank guarantee by 8 October 2019. Mr Elias' evidence, which I accept, was: (T14:15-15:23) "Q. Can you tell his Honour the current position with respect to the outstanding bank guarantee in the sum of $160,000? A. Presently, I'm expecting an unconditional approval by 4pm today, which will take probably in the vicinity of two to three working days to then settle into cash to convert to a bank guarantee or to top up the existing bank guarantee to the 460. Q. Who was providing, or who do you expect, will provide the bank guarantee? A. As in institution or-- Q. Yes. A. That'll go through NAB. Q. What steps have been taken by you to obtain that? A. I've actually had an express loan taken place and documentation will be here. Q. What do you mean by an "express loan"? A. Two, two to three day approval, like, an assured approval. Q. You said that there's a loan? A. Yes. Q. Who was the loan between? A. The loan's between me and an investor. Q. That loan is in your personal name, is that correct? A. No, the loan will be in the investor's name but the investor will then loan those funds to me. Q. What will you then do with those funds? A. Those funds will be taken to NAB to top up the balance from 300 to 460. Q. Is the position this, you've arranged for a loan in the sum of $160,000 to be provided to you personally, is that correct? A. Yes. Q. With that $160,000, you intend to provide that to the NAB, is that correct? A. Yes. Q. You anticipate the NAB will use the cash of $160,000 as security for the bank guarantee? DAWSON: I object. WITNESS: Correct. HIS HONOUR: What's the objection? DAWSON: It's simply leading the witness through this evidence and with simply yes or no answers, Mr Weinberger should be asking the witness what steps he's taken to procure or be able to satisfy an undertaking to the Court, not-- WEINBERGER: I did, your Honour, and we can do this-- HIS HONOUR: I'll allow it. We can do it the long way or the short way, so we'll do it the short way."
I accept Mr Elias' evidence in his affidavit sworn on 2 October 2019 concerning functions currently booked at the Premises: "10. The Plaintiff conducts numerous weddings and other similar style of functions at the Premises. The following functions have been booked and deposits received. (a) 6th October 2019 - Natalie wedding (b) 12th October 2019 - Jansen wedding (c) 19th October 2019 - Branka wedding (d) 8th November 2019 - school 4 Dance Xmas party (e) 9th November 2019 - Moses 21st (f) 22nd November 2019 - Finch wedding (g) 23rd November 2019 - Astrid Boxing (h) 30th November 2019 - Alesha wedding (i) 7th December 2019 - Amanda 21st (j) 13th December 2019 - Hussein Boxing (k) 14th December 2019 - Biance Wedding (l) 20th December 2019 - Xmas party Tristar"
Comparison between that list and the list set out in paragraph [28] above demonstrates that the night club or dance party events - a 70s night and an 80s night - have been cancelled, albeit one of these had been replaced by the 5 October event. Mr Elias' evidence in cross-examination was that "The whole Club Formuda has been cancelled". I understood this to be the name used for the various dance party events that Dee Vine had previously permitted to be conducted at the Premises.
In relation to the 5 October event, Mr Elias' original evidence in his affidavit sworn on 18 October 2019 was: "11. The function that took place on Saturday 5 October 2019 was pre-booked many months ago, and was undertaken with the prior permission of the Police and the Office of Liquor and Gaming. I sought to have the function moved to another venue but was unable to do so. Due to the nature of the event I engaged significant additional security in addition to the Police that were present. The reason for this was to ensure that patrons were security screened prior to entry and directed towards Parramatta Road on exiting to reduce any impact on neighbours. The patrons that had to walk up Catherine Street to their cars were moved along by my security people to prevent any loitering."
On the basis of the police report referred to in paragraph [33] above, I accept Mr Dawson's submission that Mr Elias' description of the 5 October event as having been undertaken "with the prior permission of the Police and Office of Liquor and Gaming" is on its face incorrect. However, I am not persuaded that Mr Elias was being deliberately misleading. The impression I formed from his evidence was that he had interpreted the presence of the Police and members of the Office of Liquor and Gaming at the 5 October event, including advice the Police had given him beforehand about security and related issues and the fact that neither authority had sought to stop the event, as some form of permission.
There was also debate in cross-examination between Mr Dawson and Mr Elias about whether the 5 October event had in fact been booked "many months ago" or was a late booking because the premises at which the concert was originally to be held proved to be too small. It is not necessary for the Court to resolve this dispute because, whichever it was, there is no doubt that Mr Elias proceeded with the 5 October event knowing that it was in breach of the Sub-Lease and the undertaking which had been given on behalf of Dee Vine to the Court on 30 September 2019. On no view could the 5 October event be seen as complying with the obligation to use the Premises only as a reception centre, even accepting as I do that the expression "reception centre" is wider than a "wedding reception centre" so that permissible events are not confined to those associated with weddings.
At the conclusion of Mr Elias' cross-examination, I had this exchange with him in relation to the 5 October event (T38:28-39:38): "Q. I see. Well when you had this event on 5 October, did you understand at the time that it apparently was an event that would not comply with paragraph 12 of the POPE? A. Not exactly, your Honour, no. I've been alerted to that paragraph before by the licensing sergeant. So I was also made aware that that paragraph is an extremely old paragraph that if on re-application those things would not be adhered to for a normal function centre, or an events centre. Q. All of that may be true, but I'm just trying to understand what did you think you were bound by in terms of the types of events you could have? A. Well I could only be bound by the POPE. Q. All right. So you told me that you knew about the POPE in May. So I just want to understand, when you agreed to have this 5 October event, did you understand that that was in fact going to be in breach of the POPE? A. I did, your Honour, yes. Q. Well can you give me any explanation as to why you went ahead knowing that it was in breach of the POPE? A. The breach from my understanding has got to do with ticketed, mainly ticketed events. Q. No, just explain to me why did you go ahead knowing that you were doing something that was in breach of the POPE, which you believed to be the applicable term? A. The only reason for pursuing or going ahead with that was financial purposes, that's it. Q. So you needed the money? A. Yes. Q. Do you understand that the issue I have to decide is whether - or one of the issues I think I'm going to have to decide - is whether you, to be quite frank, can be trusted to continue to comply with whatever the terms are of the lease and other legal requirements for the operation of these premises? A. Yes, your Honour. Q. Well what assurance can the Court have that you're going to do that given that you've told me that if you need the money you were prepared to knowingly breach the terms of the POPE? A. Well the only assurance, your Honour, is I, I have to be limited and restricted to those events no matter what, or that would end the lease. That simply. Q. Are you telling me that you're prepared to undertake to conduct events strictly in accordance with what is in paragraph 12 of the POPE unless and until that's changed? A. Yes, and until that's changed, absolutely. But from what I understand, your Honour, the only person who can actually make that change - well we can't make that change as the sub-lessor. Q. Well that's a different question. But are you now telling me on your oath that you will only operate the premises with events that fit within paragraph 12 of the POPE? A. Up until that time of application, absolutely. Q. Yes. And you understand that means you can't, you really can't have events that are publicly ticketed, that the members of the public can come along to? Do you understand that? A. I'm aware of that, your Honour."
While this exchange referred to the POPE Licence, it was clearly in the context of compliance with the Sub-Lease. I am satisfied to the Briginshaw standard that Mr Elias considered that Dee Vine was bound by the POPE Licence and that he knew that the 5 October event breached clause 12 of the POPE Licence, the Sub-Lease and Dee Vine's undertaking to the Court (see paragraph [30] above).

Legal principles

With one exception, which I consider in paragraphs [56] to [60] below, the applicable legal principles were not in dispute. I gratefully adopt this summary from Palais' written submissions: "General Principles 4.1. The following general principles apply: (a) A lessee's obligation is to be familiar the terms of the its lease and to make sure that they are complied with [see Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW Ltd (1970) 2 BPR 9562, per Hope J at 97,145] (b) The statutory power is co-extensive with the inherent power of the Court [Hillam v Leduva Pty Limited [2010] NSWSC 1360 at [67]; (c) The granting of relief against forfeiture is not 'as of right' but requires the Court to exercise its discretion in favour of the lessee [see Pioneer Quarries ibid]; (d) Accordingly, a successful applicant must satisfy the usual equitable maxims: 'he who seeks equity must do equity' and an applicant must 'come with clean hands' [Riviera Holdings Pty Ltd V Fingal Glen Pty Ltd [2013] SASC 77 at [17]; Wilkinson v S & S Gikas Pty Ltd [2006] NSWSC 1314 at [30]]; (e) The right to forfeit for non-payment of is in substance security for payment of the rent [Pioneer Quarries v Permanent Trustee Co of NSW Ltd (1970) 2 BPR 9562; Dee-Tech Pty Limited v Neddam Holdings Pty Limited (No 2) [2009] NSWSC 1355 at [125]; (f) Where the only event of default is failure to pay rent, the Court will ordinarily grant relief against forfeiture upon payment of rent, costs and interest and there is no reason to believe that the tenant will not meet his or her future obligations to pay rent [Pioneer Quarries; Dee-Tech at [126]; Commercial Tenancy Law (LexisNexis, 4th Ed) at [19.2]] (g) Once a lessor has all that the right of re-entry was bargained for (ie security for payment of rent), it would require special or exceptional circumstances for the Court to decline relief. It has been described as 'a heavy burden on the lessor as to why equitable relief should not be granted' [Hace Corp v F Hannan (1995) 7 BPR 14,326 at 14,329]; (h) For the Court to decline relief it must not be unconscionable or inequitable for the landlord to insist on strict compliance with its strict legal rights; (i) The conduct of the lessee may be such that it would not be unconscionable or inequitable to decline relief against forfeiture. This may occur where the bargain to be protected goes beyond non-payment of rent and the lessee is in breach of other covenants. A lessor may point to non-monetary breaches of covenants the subject of a notice under s.129 which have not been remedied and which would otherwise warrant termination of the lease; (j) The inquiry into whether it would not be unconscionable or inequitable for the landlord to insist on strict compliance with its strict legal rights has been variously described: (i) whether the tenant has demonstrated an unwillingness to honour its obligations under the lease and where the lessees future compliance with the lease appears unlikely [Shiloh Spinners Limited v Harding [1973] AC 691 at 725-6 per Lord Wilberforce] , or in real doubt [Elevation (NSW) Pty Ltd v The Uniting Church [2014] NSWSC 331 at [13], or where "… the tenant's attitude to the lease must be such that no reasonable landlord could expect the tenant to honour its obligations." [see Courtney Creche v Okko's Fine Art and Custom Framing (unreported NSWSC per Young J as His Honour was, 22 June 1995)]; (ii) whether the lessee's conduct was wilful [International Business College v Alphacrucis College Ltd [2009] NSWSC 1088 at [39]], and did not arise from ignorance or inadvertence [Dee Tech at [127]. In the former case, relief will only be granted in exceptional cases [Allsvelte Pty Ltd v Cassegrain Wines Pty Limited [2015] NSWSC 1370 at [105]]; (iii) whether the forfeiture results in some windfall or other disproportionate outcome [International Business College at [39]; (iv) whether the lessor caused or contributed to the breach [Dee Tech at [131]]; and (v) the gravity of the breach and the damage to the lessor and loss to the lessee [Allsvelte at [104]]."

The parties' submissions

Dee Vine submitted that relief against forfeiture ought to be granted because: 1. The September and October rent had been paid and this was not a case where delays in payment of rent were "gross". 2. While the additional bank guarantee had not yet been able to be provided, this was notwithstanding Mr Elias' best efforts and the Court should take account of his evidence that the Additional Bank Guarantee or equivalent security could be provided within seven days. Mr Weinberger submitted that equivalent security would be payment of $160,000 on behalf of Dee Vine to be held in a controlled moneys account under the control of Palais' solicitors in lieu of, and presumably on the same terms as, the Additional Bank Guarantee. 3. The alleged unauthorised assignment of the Sub-Lease by transfer of the shares in Dee Vine had been reversed. 4. The Court should be satisfied that the Premises would only now be used in accordance with their approved permitted use as a reception centre. 5. There was unchallenged evidence from Mr Elias that sound reduction measures had been taken by Dee Vine in relation to the Premises. 6. Dee Vine had complied with its obligations in relation to the removal of garbage. 7. There would be prejudice to third parties if relief against forfeiture was not provided because there are a number of pre-booked functions, including weddings, that would not otherwise be able to proceed. 8. Mr Elias had candidly conceded that by permitting the 5 October event, Dee Vine had breached both the Sub-Lease and its undertaking to the Court. It was accepted that this was a serious matter, but should be viewed as a one off. Mr Elias had given an explanation (the need to generate income) for the breach but this was not an excuse. The Court should accept that Mr Elias understood that such conduct could not occur again on pain of the Sub-Lease being lost. 9. The Notice was deficient in a number a respects, both as to the particularity of the breaches and because it did not specify with sufficient clarify what steps Dee Vine was to take to "rectify" the alleged default in the user of the Premises, the creation of excessive noise and in relation to garbage.
Palais submitted that the following matters weighed against the exercise of the Court's discretion to grant relief against forfeiture: 1. Dee Vine did not dispute its breaches of the Sub-Lease. Furthermore, it had breached the undertakings given to the Court on 30 September 2019. 2. Dee Vine had been in wilful and contumelious breach of the Sub-Lease since April 2019, when Mr Elias assumed control of Dee Vine. 3. Dee Vine's conduct, including breach of the undertakings and conducting the 5 October event, disentitled Dee Vine to equitable relief. 4. It was not in the circumstances unconscionable for Palais to enforce its strict legal rights. 5. Palais had not caused or contributed to Dee Vine's breaches and would not enjoy any windfall from the forfeiture. 6. The Court could not be satisfied that Dee Vine would comply with the terms of the Sub-Lease. 7. Dee Vine had not rectified the breaches which were the subject of the Notice.

Resolution

There can be no doubt that Dee Vine's failure to pay the September rent entitled Palais to determine the Sub-Lease and re-enter the Premises.
Insofar as Palais relies on the Notice in addition to Dee Vine's failure to pay the September rent, it is necessary to consider the validity of the Notice. I respectfully adopt and apply what fell from Hodgson JA (with whom Allsop P and Macfarlan JA agreed) as to the requirements for a valid notice under s 129 of the CA in Macquarie International Health Clinic Pty Limited v Sydney South West Area Health Service [2010] NSWCA 268; (2010) 15 BPR 28,563: "323 In my opinion, the above authorities clearly indicate that a notice under s 129 must not only allege breach, but must also describe the particular acts or omissions constituting the alleged breach; and the notice must indicate the acts of the tenant which the landlord would consider sufficient for the lease to continue, and upon completion of which the landlord would abandon its claim to forfeit. The standard of particulars or degree of specificity depends upon the circumstances, including the nature of the covenant alleged to be breached, the tenant's actual or constructive knowledge, and whether the landlord claims reasonable compensation. To use the example of Lord Buckmaster LC, where there are several options open to a tenant to waterproof a leaking ceiling, then that choice is at the tenant's discretion. Thus s 129 is, in my opinion, directed at allowing the tenant to bring about (within a reasonable time) a state of affairs under which the landlord would not pursue forfeiture. 324 In particular, the lessee should not be left to speculate as to whether, if it took whatever action it could to remedy the specified breaches, the lessor might nevertheless proceed to terminate the lease on the basis that the breaches were not capable of remedy or that, because what the lessee did was insufficient to eliminate loss caused to the lessor by the late performance of the lessee's obligations, the lessee was still in breach."
Bearing that test in mind, I am satisfied that the Notice gives adequate particulars both of breach and steps to remedy in relation to failure to provide the Additional Bank Guarantee and failure to obtain Palais' consent to the transfer of all of the shares in Dee Vine from Mr Bhogul to Mr Elias.
Insofar as the Notice asserts breach of the Sub-Lease by reason of use of the Premises other than as a reception centre, I am not satisfied that the breach is sufficiently particularised by the expression "by the use of the Premises as a nightclub venue or other than as a reception centre". Even allowing for Dee Vine's knowledge about the issues of concern to Palais, in my respectful view Palais was in a position to and should have given particulars of the events about which it made complaint. This would have put beyond doubt the type of events upon which Palais relied (including whether or not there were functions that were not said to be using the Premises "as a nightclub venue" but which were still asserted to be examples of use "other than as a reception centre") and leave Dee Vine in no doubt about the types of events which it was being asked to cease to hold to avoid forfeiture of the Sub-Lease.
Similarly, the particulars of breach and remedy in relation to noise lack the requisite specificity. The reference to "loud and excessive music and noise" is very subjective and gives no guidance as to the precise kind of noise which Palais was requiring Dee Vine to cease creating. For example, the liquor licence in evidence for the Premises contains specific requirements of maximum noise level measured in decibels and specific frequencies. It was easily open to Palais to specify breaches by occasions on which those noise levels were alleged to have been exceeded and making clear that they were not to be exceeded in the future. Thereby Dee Vine would have known precisely what it was expected to do to comply with the Notice.
Finally, reliance in the Notice on the alleged failure to remove all trade waste, garbage and refuse from the Premises fails for the same reason. In particular, the statement of remedy as "regularly removing all trade waste, garbage and refuse from the Premises and Building" is so imprecise as to leave Dee Vine (to quote Hodgson JA) to "speculate" as to whether particular action it took might still be insufficient to prevent determination of the Sub-Lease. "Regularly" is, in all the circumstances, too imprecise for Dee Vine to know what it must do to avoid forfeiture. It could easily have been expressed by particular time periods (for example, weekly) or in relation to particular types of events (for example, after events attended by more than a certain number of people).
Subject to what follows, it is therefore the case that the Court is satisfied the breaches upon which Dee Vine is entitled to rely are the non-payment of the September rent, the failure to provide the Additional Bank Guarantee and the assignment of the shares in Dee Vine from Mr Bhogul to Mr Elias without Palais' consent.
The qualification to which I have just referred arises from a debate between the parties as to the extent to which the Court can look at breaches, especially non-monetary breaches, which are not the subject of a notice under s 129 of the CA. Mr Dawson submitted that on a proper understanding of the authorities, where (as here) a landlord relied on a proven monetary default, the Court was entitled to look at any other aspect of the lessee's conduct in exercising its discretion to relieve against forfeiture. At the very least, the Court was entitled to look at matters which fell within the description of "exceptional circumstances" (relying on Gill v Lewis [1956] 2 QB 1). Mr Weinberger submitted that the Court was confined to those matters which were properly the subject of a notice under s 129 of the CA.
In my opinion, the law on this question is as set out by White J (as his Honour then was) in Dee-Tech Pty Ltd v Neddam Holdings Pty Ltd [2012] NSWSC 251; (2012) 16 BPR 31,089: "214. In the case of forfeiture of leases it is settled that as a general rule in deciding whether relief against forfeiture should be given, the court should have regard only to those breaches which could warrant forfeiture of the lease. Except in the case of covenants to pay rent, a lessor is not entitled to terminate the lease by re-entry or otherwise for breach of the lease without giving notice under s 129 of the Conveyancing Act and that notice not being complied with. Hence, as a general rule, it is only the failure to pay rent or those breaches which have been the subject of a s 129 notice and that have not been remedied that can be taken into account in deciding whether relief against forfeiture should be granted (Pioneer Quarries (Sydney) Pty Limited v Permanent Trustee Co of NSW Limited (1970) 2 BPR 9,562 at 9,576; Tutita Pty Ltd v Ryleaco Pty Ltd (1989) 4 BPR 9,635 at 9,638; Hayes v Gumbola Pty Ltd (Young J, 17 June 1986, unreported; BC8600926 at 9); Mineaplenty Pty Ltd v Trek 31 Pty Ltd [2006] NSWSC 1203 at [68]). 215 However, the principle is not absolute. In the exercise of the broad discretion conferred by s 129 the court can have regard to other breaches in considering whether to exercise the discretion to grant relief, at least where special circumstances exist (Batiste v Lenin [2002] NSWCA 316 at [61]-[62]). That will particularly be so if there have been breaches of the lease after notice under s 129 was served (Tutita Pty Ltd v Ryleaco Pty Ltd at 9,638)."
The passage to which his Honour refers in Batiste v Lenin [2002] NSWCA 316; (2002) 11 BPR 20,403 ("Batiste") is: "61 In Tutita Pty Ltd v Ryleaco Pty Ltd (1989) 4 BPR 97311 at 9638 Meagher JA, with whose judgment Priestley and Clarke JA agreed, in upholding an appeal from a decision to refuse relief against forfeiture so that the Court was required to exercise that discretion afresh, said: "Before this court can adequately perform that exercise, it will be necessary to determine what, if any, effect can be given to the circumstance that the lessee was in breach of the covenant requiring it to obtain the mortgagee's consent which undoubtedly did take place although the notice under s129 had not specified that breach. This is a matter which is the subject of one decision by this Court viz the decision of Hope J (as he then was) in Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of New South Wales Ltd . In that case, after a careful review of the authorities, his Honour concluded that where a notice is issued specifying one breach a court cannot, unless there are special circumstances, take into account other breaches which have not been referred to in the notice. His Honour did not decide that in no circumstance can a court take into account such other breaches, and such a conclusion would be surprising in view of the ample discretion of the court. Indeed, in some cases (for example where there have been continued and repeated breaches of covenants after the notice has been served) a court of Equity, asked to relieve against any forfeiture, would necessarily have to take into account unspecified breaches. Nevertheless, in my view his Honour in that case correctly laid down the law applicable, and in the present case I do not see any special circumstances which could enable us to take into account the lessor's failure to obtain the mortgagee's consent to the sub lease in question." 62 I accept, as this Court did in Tutita Pty Ltd v Ryleaco Pty Ltd, that the Court when asked to grant relief against forfeiture would not ordinarily take into account breaches which for want of a notice under s129(1) did not allow a right of re-entry or forfeiture to be enforced by action. But, as Meagher JA pointed out, the Court's discretion in considering such an application is not necessarily fettered in a case such as the present. Bryson J found that Hazaran had repudiated the lease as the result of very significant breaches of covenant. These led his Honour to the conclusion that Hazaran had evinced an intention not to comply with the terms of the lease. It would, in my opinion, be quite unjust to the lessor to ignore such breaches in considering whether to exercise the discretion to grant relief. The claim to possession was based not merely on breaches of conditions in the lease but also on the lessee's repudiation of the lease."
It will be apparent from the passage that I have just cited that the "special circumstances" in Batiste to which White J referred were that the other conduct to which the Court had regard was repudiatory conduct on the part of the lessee. I do not think that the category of "special circumstances" is closed. Nevertheless, the fact that in Batiste it was repudiatory conduct that was thought to be sufficiently special suggests that such circumstances should be legally significant or otherwise very serious. In general, I do not think this would extend to matters of dispute between a landlord and tenant that have not gone beyond contested allegations of breach. In the present case, I am not satisfied that the dance party events which Dee Vine permitted to take place on the Premises between April and September - and which events, for the purpose of the argument, I accept were in breach of the Sub-Lease - are "special circumstances" which the Court is entitled to take into account in the exercise of its discretion. This is especially the case where Palais has not drawn to attention any correspondence in which it was asserted that Dee Vine had repudiated (as opposed to merely having breached) the Sub-Lease.
On the other hand, I have no doubt that the Court should take into account, whether as "special circumstances" or as matters going generally to the Court's discretion arising from breach of its own process, Dee Vine's breach of its undertaking to provide the Additional Bank Guarantee and, even more seriously, to permit the 5 October event to proceed in circumstances where the Court is well satisfied on the Briginshaw standard that Mr Elias understood that the event did not comply with Clause 12 of the POPE and the user requirement under the Sub-Lease.
However, as I shall next develop, despite the very serious and adverse impact I consider permitting the 5 October event has on Dee Vine's entitlement to relief, that is sufficiently, but not by much, outweighed by my satisfaction that Mr Elias has resolved to comply with the Sub-Lease by not holding any such further events. To this I add that it is clear that he understands that Dee Vine will lose the Sub-Lease if such further conduct occurs.
I am therefore satisfied that the Court should exercise its discretion to grant relief against forfeiture, albeit on terms.
I have reached this conclusion for five reasons.
First, Dee Vine's monetary breach for non-payment of rent has been cured. However, given that the next rental payment is due in a fortnight or so, it seems to me appropriate that any relief be conditional on that payment being made on or before its due date of 7 November 2019. The non-monetary breach in relation to the assignment of the issued share capital of Dee Vine has also been cured. The outstanding non-monetary breach in relation to the provision of a guarantee will be dealt with as part of the conditions that the Court will impose.
Second, the Court is satisfied that Mr Elias will ensure that no further events of the dance party or night club type will be held at the Premises. As I have already observed, he clearly understands that such events breach the Sub-Lease and Clause 12 of the POPE Licence (irrespective of whether or not the POPE Licence continues to apply, because it is inconceivable that an event that would otherwise be a lawful use of the Premises would not be an event that met the requirements of Clause 12).
The Court is therefore satisfied that events such as the 5 October event will not recur. However, the fact that the 5 October event did occur, in circumstances where I have found that this was in knowing breach by Mr Elias on behalf of Dee Vine of the Sublease and subsequent undertaking to the Court, warrants a condition being imposed to make it clear that a repeat of such conduct will result in forfeiture of the sublease.
Third, looking at the matter practically, there seems to be little doubt that the issues of noise and rubbish mostly related to events such as the 5 October event. If those events cease to be held, then the Court is satisfied future breaches in relation to excess noise or the failure to remove what appears to have been excess rubbish, are highly unlikely to recur.
Fourth, the annual rent is $230,000 plus GST. Palais already has a guarantee of $300,000 from Dee Vine. The relief which the Court proposes to grant will be conditional upon the Additional Bank Guarantee (or its equivalent) being provided. That will mean that Palais has a guarantee equivalent to two years' rent for the Premises. That is a considerable degree of protection against the consequences of any future breach by Dee Vine.
Fifth, although not decisive, I have given some weight to the inconvenience that would be caused to those third parties who already have weddings and other functions booked at the Premises.
Finally, I note that between the conclusion of the hearing and the time of delivery of these reasons, Palais' solicitors submitted a document which in addition to specifying when in fact rent was paid between April and October 2019, states that outgoings of $4,174.62 and interest on late rent of $2,578.35 remains outstanding.
Those amounts should be paid and the Court's relief will be conditional upon that payment.
I will hear the parties as to the appropriate form of the orders which should be made, including as to costs. However, for the avoidance of doubt, I summarise that relief against forfeiture will be conditional on: 1. On or before 30 October 2019 Dee Vine having either provided the Additional Bank Guarantee or paid to Palais' solicitors $160,000 to be held in lieu of the Additional Bank Guarantee. 2. The unpaid outgoings and interest in the sum of $6,752.97 being paid by Dee Vine to Palais on or before 30 October 2019. 3. The November rent being paid on or before its due date of 7 November 2019; and 4. That, in the absence of agreement between the parties otherwise, that in using the Premises as a reception centre Dee Vine will only permit such events to take place on the Premises as comply with clause 12 of the POPE Licence.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 25 October 2019

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (9 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (11)