Easy Buy International Pty Limited v Macquaire Goodman Property Services Pty Limited & Ors

Easy Buy International Pty Limited v Macquaire Goodman Property Services Pty Limited & Ors - [2006] NSWSC 148 - NSWSC 2006 case summary — Zoe

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The facts 3 The fourth defendant is the registered proprietor and lessor of the Premises. The Premises are in a warehouse that is managed by the Macquarie Goodman Group, a group of companies that appears to comprise the first three defendants. The fourth defendant's predecessor in title leased the property to the plaintiff for a term of one and a half years from 18 August 2003 to 17 February 2005. The Lease contained a holding-over provision (cl 1.2) and provided that the monthly tenancy arising on holding-over could, on default, be terminated on 3 days notice. The permitted use under the Lease is "warehousing and distribution" (item 10; cl 5.1). 4 Since the commencement of the Lease, the plaintiff has carried on the business of selling furniture. Most of its sales result from orders placed over the internet or from phone orders generated from its internet site. Most goods are delivered by the plaintiff from its stock at the warehouse, but some customers collect their goods. Most payments are made via the internet or cash on delivery (COD). The plaintiff also makes a relatively small number of cash sales to customers at the warehouse. From January 2005 to February 2006, the cash sales transactions at the warehouse represented 6.7% of the plaintiff's total sales turnover. 5 The principal of the plaintiff is Michael Wood who has sworn two affidavits in these proceedings, one on 28 February 2006 and the other on 6 March 2006. The Asset Manager of the first defendant is Robert Ramsbottom who has sworn two affidavits, one on 2 March 2006 and the other on 8 March 2006. Since at least October 2005 the parties have been engaging in discussions in respect of the defendants desire to find a new tenant for the Premises. On this basis, at least, it was understood that the plaintiff would, in due course, vacate the Premises. The new tenant is to be Kuehne & Nagel (K&N), a shipping company which already leases other areas within the warehouse and wishes to expand its operations into larger premises. 6 The parties are at issue as to what was said in the period October 2005 to February 2006 in relation to the plaintiff's intentions regarding its vacation of the premises. Mr Ramsbottom claims that in October 2005 he had a telephone conversation in which he advised Mr Wood that the defendants had found a new tenant. Mr Ramsbottom also claims that in November 2005 he had a telephone conversation with Mr Wood in which he confirmed that another tenant had been found. Mr Wood allegedly advised him that the plaintiff had already started to look for other premises and that it should be "able to be out by mid February 2006". Mr Wood denied that this conversation occurred. Rather he claimed that this conversation focussed more on the new tenant needing access to the Premises for assessment by consultants. Mr Wood claimed that Mr Ramsbottom said the plaintiff had "plenty of time" because K&N had taken 12 months to negotiate their existing lease. 7 Mr Ramsbottom claims that Mr Wood advised him in a telephone conversation in late November 2005 that the plaintiff had found "somewhere else" but that "a couple of weeks" was needed to prepare the premises and that the plaintiff should be "out by mid February". Mr Ramsbottom claims that he advised Mr Wood on that occasion that the defendants did not have a particular date in mind because they had not yet signed heads of agreement with K&N. Mr Ramsbottom claims that he informed Mr Wood that he would keep Mr Wood "posted" and that if he needed some "short term place" the defendants might be able to help. 8 Mr Wood denied the terms of this conversation. During cross-examination he was shown an email dated 30 November 2005 (Ex 2) he wrote to his business partner in which he said: There is a danger with us needing to stay here till at least 1/3/06 and more likely till at least mid 3/06. We don't have a choice on this and I have told Macquarie I will be here until end 2/06 without any reaction one way or another but there is ongoing activity here with latest an engineering team testing the floor strength. Its (sic) definitely leased but incoming tenant have not set occupation date as yet. 9 That statement by Mr Wood to his business partner in the email is not consistent with the suggested conversation that Mr Wood advised Mr Ramsbottom that the plaintiff would be out by "mid" February. 10 Mr Ramsbottom claimed that he had a further conversation with Mr Wood at the beginning of December 2005 in which he claimed that Mr Wood advised him that the plaintiff could not vacate the premises by "early January" as that would be "too early" but that the plaintiff could vacate by the "middle of February 2006". In this conversation there was an agreement with Mr Wood that the plaintiff would allow K&N to have access to the Premises for the purposes of conducting some tests and showing consultants through the Premises. Mr Wood denied that he advised Mr Ramsbottom that the plaintiff could vacate by the middle of February. He claimed that a conversation in relation to allowing access for testing occurred in January 2006. 11 On 7 December 2005 Mr Wood sent an email (Ex 3) to his business partner in which he advised him that he had been negotiating in respect of some premises in O'Riordan Street. That email included the following: I have asked for access to O'Riordan as early as possible and originally was agreed as end 2/06 but they pushed it out to end 3/06 when Deed arrived. …

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Accordingly we regard your notice to vacate the premise to be invalid and we would invite you to serve a new notice on our client pursuant to the terms of the lease. (emphasis added) 15 Mr Wood did not receive the purported notice dated 9 December 2005 until 13 December 2005. Mr Ramsbottom claimed that he had a conversation with Mr Wood on 11 December 2005, but in cross-examination, when he was advised that such date fell on a Sunday, he suggested that the conversation probably occurred on 12 December 2005. In any event, Mr Ramsbottom claimed that in this conversation he advised Mr Wood that the plaintiff did not have to vacate the premises as early as January and that so long as the plaintiff could vacate by the middle of February it would be "acceptable". Mr Ramsbottom claimed that Mr Wood said, "that should be ok". Mr Wood denied that this conversation occurred. 16 Mr Wood went overseas in the Christmas/New Year period and did not return until early January 2006. Mr Ramsbottom claimed that he had a conversation with Mr Wood in early January 2006 in which he asked Mr Wood how the plaintiff was going with the "time frame for vacating the premises and relocating". He claimed that Mr Wood advised him that things were "progressing" and it looked like the plaintiff would be able to leave around "early March". Mr Wood denied that this conversation occurred. 17 Mr Ramsbottom claimed that a further conversation with Mr Wood occurred at the end of January 2006 in which he asked Mr Wood whether the plaintiff was "still on track about moving out". He claimed that Mr Wood suggested that the plaintiff was "hoping to be out in mid to late February 2006". Mr Ramsbottom claimed that he informed Mr Wood that if the defendants could help out with any "short term space in the meantime" the plaintiff should let them know. Mr Wood denied this conversation. 18 Mr Ramsbottom gave no evidence of any further contact with Mr Wood until 23 February 2006. He claimed that he was advised by Ms Chard that he should go and speak to Mr Wood to find out "what's going on" in respect of the plaintiffs' suggested incapacity to vacate by "early March". Of course this was a date later than the suggested "mid February" departure date allegedly mentioned in the late January 2006 conversation. 19 Mr Ramsbottom claimed that in a telephone conversation between Ms Chard and Mr Wood on 22 February 2006, Mr Wood had agreed to the suggestion that the plaintiff was "still working towards leaving on 6 March 2006". On 23 February 2006 at a meeting at the Premises Mr Ramsbottom claimed Mr Wood advised that the plaintiff was unable to vacate by early March, "as I agreed", because the new premises to which the plaintiff was moving would not be available. Mr Wood also advised that the plaintiff could not vacate until 20 April 2006. Mr Ramsbottom said, "that is not acceptable. We have all been working on the basis that you would be leaving on or before 6 March 2006". Mr Ramsbottom claimed that Mr Wood then said that his legal advice was that the defendant had not served the Notice of Termination correctly and that there was a need to give three months notice. Mr Ramsbottom then said the plaintiff was in breach of the Lease for "other reasons". Mr Wood advised Mr Ramsbottom that he did not know what Mr Ramsbottom was talking about. Mr Ramsbottom claimed that he then said: If you want to go down the legal path, that is fine but my experience is that the only people who win in this situation are the lawyers. We would prefer to continue by negotiating a solution. We are prepared to help you by moving your existing stock to a nearby premises to make room for Kuehne & Nagel's works. We would give you these alternative premises close by free of charge to store your stock, so they can be stored and protected on the premises by Kuehne & Nagel's works were carried out. What do you say about that?

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If you have not vacated by that date, we will repossess the Premises to your exclusion. 22 On 24 February 2006 the defendant wrote to the plaintiff with what it described as a "sign of good faith" in which it offered to the plaintiff alternative premises. It suggested that the plaintiff could occupy premises in Bourke Street, Alexandria under licence from 1 March 2006 to 31 March 2006 with no rent payable during the period, but that if it decided to stay on longer a proposed rental regime was suggested. That offer remained open until 5pm that day. 23 On 24 February 2006 the plaintiff's solicitors responded to the defendants purported termination dated 23 February2006. That letter included the following:- We have sought our client's instructions in relation to the breaches alleged in your letter and advise as follows: 1. Our client denies that the rent is unpaid for February 2006; and 2. In relation to the use of the premises our client denies that it is conducting the business in breach of the permitted use. Notwithstanding the alleged breaches (which are denied by our client) we regard your alleged right to terminate our client's lease to be unreasonable, unconscionable, capricious and deliberately designed to cause our client substantial damages. Having noted the above, we regard your company's conduct as an attempt to circumvent your failure to respond to our letter of 14 December 2005 in which we invited you to issue a new notice to vacate the premises pursuant to the terms of the lease. We note that we have not received any response to our correspondence. 24 The plaintiff's solicitors then advised that unless the defendant withdrew the purported notice of 23 February 2006 it would approach the Supreme Court. Although the letter is not in evidence, it is agreed between the parties that on 27 February 2006 the plaintiff gave 3 month's notice in writing of termination of the Lease (cl.1.2(c)). As I have said earlier these proceedings were commenced on 28 February 2006. 25 The defendants submitted that the contents of the emails (Exs 2 & 3) support Mr Ramsbottom's evidence of the conversations he alleges occurred with Mr Wood in the period October 2005 to February 2006. Even if Mr Ramsbottom's evidence is accepted, I am of the view that its effect is questionable having regard to the plaintiff's solicitors letter of 14 December 2005. 26 In the first five conversations ranging between October 2005 and 11 or 12 December 2005 Mr Ramsbottom claimed that the plaintiff had indicated that it could vacate by "mid-February". These conversations all pre-dated the plaintiff's solicitors letter of 14 December 2005. There were two alleged conversations after the 14 December letter, one at the beginning of January 2006 when the alleged departure date was "early March" and one at the end of January 2006 when the alleged departure date moved back to "mid to late February 2006". These latter two conversations seem to me to be peculiar, having regard to the fact that on 23 December 2005 Mr Wood had signed a lease for the plaintiff in respect of premises that were not available until 1 April 2006. It is also curious that he would advise Mr Ramsbottom in early January 2006 that the plaintiff would be able to vacate the premises in "early March" but then change that to "mid to late February" in a conversation later that month, knowing that the plaintiff could not have access to the new premises until 1 April 2006. 27 I accept that there were discussions prior to the plaintiff's solicitors letter of 14 December 2005 in which possible departure dates were discussed. However, once the letter of 14 December 2005 was received by the defendants I am satisfied that circumstances changed quite dramatically. The defendants were on notice that the plaintiff wished to rely on its rights under the Lease and that it did not accept that the one months notice to vacate was valid. The defendants knew that the plaintiff required the defendants to give the appropriate notice under the Lease of three months. 28 There is no question in these proceedings that the appropriate notice was three months and not one month. What is extraordinary is the defendant's failure to acknowledge the letter, the failure to discuss it with the plaintiff and the failure of Mr Ramsbottom to even read the Lease until late February 2006. Mr Ramsbottom was not able to give any proper explanation as to why he did not read the Lease prior to that date, other than the fact that he was managing numerous properties at that time. He was also unable to give any proper explanation as to why the defendants did not respond to the plaintiff's solicitors letter of 14 December 2005. All the defendants had to do on 14 December 2005 was to issue a notice giving the plaintiff three months to vacate. That would have ensured that the plaintiff had to leave the premises by 14 March 2006. 29 I am not satisfied that the conversations alleged by Mr Ramsbottom in January 2006, if they occurred at all, had any effect on the plaintiff's entitlement to proper notice under the Lease. Alleged breaches 30 Although the defendant initially claimed that the plaintiff was in breach of the Lease by reason of non-payment of rent, such suggestion was abandoned at trial. That leaves the only alleged breach as a breach of the permitted use clause. Clause 5.1 of the Lease provides relevantly: 5. Use obligations Positive use obligations

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35 In R v Fraser (1965) 52 WWR 712, the Court of Appeal of British Columbia (Bird C.J.B.C., Maclean and Bull JJ.A) were dealing with three appeals from convictions of the appellants, Fraser and others, for offences under s 150(1) of the Criminal Code, 1953-54, ch. 51. The appellant and his company were convicted of possessing various obscene pictures and written matter for the purpose of "publication, distribution and circulation". Section 150(1) of the Code provided relevantly: 150. (1) Everyone commits an offence who (a) makes, prints, publishes, distributes, circulates, or has in his possession for the purpose of publication, distribution or circulation any obscene written matter, picture, model, photograph record or other thing whatsoever, or (b) makes, prints, publishes, distributes, sells or has in his position for the purpose of publication, distribution or circulation, a crime comic. (2) Every one commits an offence who knowingly, without lawful justification or excuse, (a) sells, exposes to public view or has in his possession for such a purpose any obscene written matter, picture, model, phonograph record or other thing whatsoever. … 36 Bird C.J.B.C. and Maclean J.A. dismissed the appeals. Bull J.A. dissented in respect of one appeal but agreed in respect of the others. Maclean J.A. said at 716: The appellants' argument really amounts to this, that a person who has possession of obscene matter for the purpose of sale, which these appellants undoubtedly did, cannot be convicted of having possession for the purpose of distribution. In Reg v National News Co [1953] OR 533, [1953] OWN 476, 16 CR 369, 106 CCC 26, it was held that the company (which the report of the argument disclosed as being a wholesale vendor of books) was properly convicted for possession for the purpose of distribution under subsec. (1) of the sec. 207 (substituted, 1949, 2nd sess., ch. 13) of the Criminal Code, RSC, 1927, ch. 36, despite the fact that the company was keeping the obscene matter for the purpose of sale.

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38 In his dissenting judgment Bull J.A. said that it was clear that the appellants' stock was located at the premises for the purposes of sale to the public. His Honour then said at 725: The question remains can it be said that they also held the items in possession for the purpose of "publication, distribution or circulation?" Obviously "publication" and "circulation" are inappropriate, so that the question resolves as to whether "possession for sale" is also "possession for distribution". I think that the reasoning in Reg v National News Co. , supra makes it clear that "distribution" and "sale" are two quite different things, although sale itself might very frequently be an element of, or a method or means of carrying out, a "distribution". If the two words were synonymous then the two subsections would cover, in part, the same offence but with a difference that defence to one would not be a defence to the other. I cannot see that such would be the intention of parliament, and it does no violence to a normal interpretation of the words to permit them to live together as separate and different offences. The normal and colloquial meaning of "distribution," as generally understood by the public in a commercial society, has the overtones of mass or wholesale supplying of things for ultimate retail sale to the public. For example, one would not suggest that a retail shoe store or a drug store "distributes" shoes or drugs to the public, but rather sells them; and behind the retail store is the distributor who distributes the stock of one or more manufacturers or makes to the various retail outlets. The word "distribution" is not defined, and being in a penal statute must be considered to bear the ordinary meaning it would be given in speech or writing, having regard to the context in which it is used. Although the dictionary meaning of the word is very broad indeed, for the reasons I have set out and its context in the section, I am of the view that the meaning must be restricted as I have indicated. 39 On appeal to the Supreme Court of Canada R v Fraser [1967] SCR 38 the Court (Taschereau C.J., and Fauteux, Martland, Ritchie and Hall JJ) dismissed the appeal. Ritchie J, delivering the judgment of the Court, said at 44: I agree with the view expressed by Maclean J.A. on behalf of the majority of the Court of Appeal that the word "distribution" as used in s 150(1)( a ) "is obviously a word of wider connotation than 'sale' as sale is only one of a number of means of distribution". The appellant submitted that this construction would mean that everyone who "sells" within the meaning of s. 150(2)( a ) would also be guilty of the offence defined in s. 150(1)( a ) and that the provisions of the former section would thus be "reduced to futility" to employ the language used in the factum filed on behalf of the appellants. Like Mr. Justice Maclean, however, I can envisage cases of individual sales which would constitute an offence under s. 150(2)( a ) and yet would not be a "distribution" within the meaning of s. 150(1)( a ), and I think also that there may well be cases of a bookseller who has in his shop a scattered few of these publications amongst a mass of inoffensive books, where a charge of possession for the purpose of sale contrary to s. 150(2)( a ) would be more appropriate that one relating to "distribution" under s. 150(1)( a ).

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There may, indeed, be many cases in which it is difficult to determine which of these two subsections should be invoked in a prosecution but, in my opinion, the present circumstances do not present any such difficulty. 40 In addition to the statement in Reg v National News Company Limited, extracted in Maclean J.A.'s judgment Pickup C.J.O. said: I think that under subs 1 Parliament was putting the distributor in the same position as the publisher, … and putting the person who sells or exposes to public view, or has in his possession for that purpose, obscene written matter, in a different position, the different position being that the person who sells or exposes to public view or has in his possession for that purpose, must act knowingly and without lawful justification or excuse. 41 It has to be remembered that the Code provided for two different offences, one for "distribution" and the other knowingly to "sell". Thus the term "distribution" in that case was in a penal statute and was in a context quite different to the context in which it is used in the Lease. The Lease is of premises in an industrial complex, from which the plaintiff operates its business and regard must be had to the provisions of the Lease to ascertain whether "distribution" include sales. 42 There is some force in what Bull J.A. said in R v Fraser about the "normal and colloquial meaning" of distribution having in a commercial society, overtones of mass or wholesale supplying of things for ultimate retail sale to the public. Bull J.A. accepted that "sale itself might very frequently be an element of, or a method of carrying out a distribution". 43 The context in which the term "distribution" was used in the clause considered by Miles CJ in Moglia Holdings is different to the context with which I am concerned. I accept that Miles CJ gave a very broad meaning to the term "distribution" and, apparently on the strength of the decision in R v Fraser, concluded that there was no reason to limit the type of sale to "wholesale sale". Having regard to the particular context in which the term "distribution" was construed in R v Fraser I am not persuaded that it provides a proper basis, in this case, to construe it as including retail sales. I do however accept that, depending on its context, the word "distribution" may mean distribution by way of sale. 44 The plaintiff also relied upon Bryson J's (as his Honour then was) decision in Golden Rams Australia Pty Limited v Shteyman & Anor [2000] NSWSC 417. In that case the plaintiff claimed it had exercised an option of renewal of a lease. Bryson J said: 33. One matter complained of is that it is said that the plaintiff has not complied with the lease with respect to the purposes for which the premises may be used. The lease specifies that the permitted use is " manufacturers and wholesalers of kangaroo and sheepskin products" . The evidence establishes clearly that the premises are used for those purposes. However, they are also used for the retail sale on the premises of goods within limits imposed by approval granted by the local council under town planning powers, that is, that the goods sold by retail must be goods manufactured on the premises. It is not clear to me that sale by retail ancillary to the manufacture of goods on the premises by the lessee is not within the permitted use. Ancillary retail sales "out the back door" are quite a common aspect of use of premises by manufacturers. However that may be, Mr Carroll's evidence was that he obtained consent (and Pt 6 of the lease contemplates the giving of consent) from the original landlord for the retail sales activity. 45 The facts of Golden Rams are quite different to those that are before me. In that case it is apparent that the local council had expressly approved of certain sales from the premises and there was evidence that approval had been obtained for the other sales in question. I am not persuaded that Bryson J's observations about ancillary retail sales "out the back door" can assist the plaintiff in this case. 46 The plaintiff also relied upon what was said to be the ordinary use of the word "distribution" as defined in the Macquarie Dictionary which includes the meaning: "transporting, marketing, merchandising and selling of a product". 47 The context in this case is that the term "distribution" is contained in a Permitted Use clause and it is directly linked to the term "warehousing" by the word "and". The Lease does not define "warehousing and distribution". Clause 5.2 of the Lease provides relevantly: Negative use obligations 5.2 The Lessee must not: … (s) hold any auction, bankrupt or fire sale in the Premises; 48 Clause 5.3 of the Lease provides that the Lessor "gives no warranty as to the use to which the Premises may be put" and provides further that the Lessee "is deemed to have accepted" the Lease "subject to any prohibitions or restrictions on the use of the Premises under any Laws or Requirements". Clause 5.4 headed "Laws and Requirements" provides that the Lessee must "comply with and observe all Laws and Requirements affecting" the Premises and "the use or occupation of the premises".

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49 A local environmental plan applies to such areas as are described in that plan: s 70 Environmental Planning & Assessment Act 1979. The definition "warehouse or distribution centre" in the Plan applies to that term as it is used in the Plan, in particular in clause 21(3). In my view the definition is not intended to have prohibitive force. Rather the definition is for the purpose of categorising or describing the types of uses that require consent. 50 Although the defendants did not rely upon the definition in the Plan when it claimed in its letter of 23 February 2006 that the plaintiff was in breach of its Lease, it was submitted at trial that by reason of the definition of "warehouse or distribution centre" in the Plan, the Permitted Use in the Lease should be construed as prohibiting sales directly to the public from the Premises. The onus of establishing breach is on the defendants. That required the defendants to establish on the balance of probabilities that the Local Council prohibited sales directly to the public from the Premises. 51 Mr Blackburn cross-examined Mr Wood in relation to whether the plaintiffs had applied to the Local Council for any consents in relation to the use of the Premises. Mr Wood gave evidence that he had spoken to the Council in what he described as a "pre-DA meeting, an informal meeting, with the town planner at South Sydney Council in Redfern" (tr 11). Mr Wood said that he was not informed that "warehousing and distribution" required the consent for the zoning area in which the Premises are located (tr 11). He accepted that the plaintiff had never applied for consent and had never been given such consent by the Council (tr 11). In re-examination Mr Wood gave the following evidence: Q. What was the substance of the information that you were given by the council at that meeting? A. The area in which the factory is was under an interim development order at the time and it was up in the air at the time. He asked me what I intended to do. He said I was not allowed to hold auctions and how many vehicle movements did I estimate I would have daily on and off the site. I said "less than ten" and he said, "keep it under ten vehicle movements" and exact words after the effect "to save yourself the trouble and the expense because it won't be dealt with in the foreseeable future". 52 Whether any requisite consent is in place was in my view left uncertain, although I intend to deal with this uncertainty in the relief to be granted. The defendants tendered a Certificate under s 149(2) and (5) of the Environmental Planning & Assessment Act 1979 in respect of whole property 165-175 Mitchell Road, Erskineville. That Certificate is dated 16 December 2002 and included the contents of clause 21(3) but numbered (2) in the Certificate. The Certificate pre-dates the meeting that Mr Wood had with the town planner. I am not satisfied that the Certificate can be relied upon to demonstrate that the plaintiff was in breach of the Lease. 53 Consent is required when a use falls within the definition of those found in clause 21 (3) of the Plan. If a use of a similar description that does not fall within the definition in the Plan is granted in a Lease, the Plan provides that consent is still necessary unless it is exempt under clause 21(2) of the Plan. 54 It seems to me that the Permitted Use of the Premises in the Lease is slightly different to that described in the definition in Schedule 1 of the Plan. The development or use in the Plan described as a "warehouse or distribution centre" is one that is used "mainly" for the "storage or handling" of "goods or materials" that have been "produced or manufactured for sale elsewhere". The plaintiff makes sales "on-line" or over the Internet. Depending upon the circumstances of each transaction, the point of sale may be at the Premises, although the customer is not physically present: Dow Jones & Company Inc v Gutnick (2002) 210 CLR 575. If that is so the goods are not "for sale elsewhere". However that does not mean that the Permitted Use allows the plaintiff to sell directly to the public at the Premises - that is, by way of inviting the public into the warehouse for the purpose of viewing the goods and buying them and taking them away. That, in my view is not what the Permitted Use in the Lease means. It is true that there is no mention of retail sales in the negative use obligations but clause 5.1 provides that the Premises may be used "only" for the Permitted Use. 55 In my view the coupling of the word "distribution" with the word "warehousing" leads to the conclusion that the Permitted Use is that the plaintiff may distribute to customers, whether by sale transacted on the Internet or elsewhere, but that the plaintiff is to distribute or, to use an apt word from the Macquarie Dictionary, "transport" those goods to the ultimate customer. In my view the context suggests that it is not intended that the plaintiff "sell" to the customers off the street. That would not be a distribution by sale but rather a retail sale. Bull J.A.'s example in R v Fraser of a shoe store not distributing shoes but selling them is apt.

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56 The letter of 23 February 2006 purporting to terminate the lease on 3 days notice claimed that the breach was "selling goods to the public directly" from the Premises. I am of the view that the sales directly to customers off the street were in breach of the Lease. 57 Mr Ramsbottom was cross-examined in relation to the letter of 23 February 2006 and in relation to the defendants' true concern about the alleged breach. He gave the following evidence: Q Your reasoning for terminating on this ground was because that was the only way you could get Mr Wood out without giving three months' notice, isn't it? A We saw this as being one avenue whereby we could get them out within a reasonable time to suit our purposes. Q. I will put the next issue to you. That is your reason, rather than any genuine concern about the activity that is being carried on? A Not entirely, no. It is part of the reason. The timing is critical for what we are trying to achieve here, but the tenant, being a monthly tenant, we certainly seek everybody's co-operation with the terms and seek everybody's co-operation, be it owned or be it rented, at any time when there is a serious concern, as you put it, we can rectify the problem within a month. … Q. Let me put this to you: if you had not needed the premises on short notice you would not have terminated this lease for the occasional retail sales that have been carried on there, would you? A Not necessarily correct. We have been marketing the property in a sense since I took carriage of it in October and it was always the intention, with every conversation I had with the current tenant, at some point in the near future they would have to vacate, so it was not necessary to invoke any specific breach of lease in order to get them to leave. Q. What I am suggesting is this: if there was a real concern this was a banned activity or an illegal activity or an activity which was causing damage to the premises or something of that kind, your first step in those circumstances, unless it was something like that, with respect, would be to go around and have a word with the tenant and say, "Look, you're doing this. It is in breach of the lease. We want you to stop", that's right? A. Correct, that would be encouraged. Q. And the reason you took this course is because you see this as an avenue for getting the tenant out at short notice, is that right? A. That is correct to the point we had been discussing the time for notice for some time. This was to close out the timing, as we had discussed. (tr 16-17)

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62 The first time the exclusion in s 129(6), "any lease or tenancy for a term of one year or, less" was enacted in New South Wales was in the Forfeiture of Leases Act 1901 (Act No 66, 1901). The provisions of the Forfeiture of Leases Act contained similar provisions to s 14 of the Conveyancing and Law of Property Act 1881 (UK) [44 & 45 Vict. Ch 41] as amended by s 2 of the Conveyancing and Law of Property Act 1892 (UK) [55 & 56 Vict. Ch 13]) except that those Acts did not include the provision, "any lease or tenancy for a term of one year or, less" as a category of lease or tenancy excluded from the operation of the relevant section. Both Victoria (s 21(5) Conveyancing Act 1915 (6 Geo. V. Act No. 2633); s 146 Property Law Act 1958) and New Zealand (s 93(7) Property Law Act 1905; s 118 Property Law Act 1952) enacted provisions similar to s 129 but neither included the provision, "any lease or tenancy for a term of one year or, less" as a category of lease or tenancy excluded from the operation of the relevant section. 63 There is nothing within the relevant Reading Speeches in New South Wales, or in the Report of the Royal Commission on the Conveyancing and Law of Property Bill, (the Hon. Justice J.M.Harvey, Commissioner, Parliamentary Papers, 1918, vol 6) as to the policy or intention behind the exclusion of such leases and tenancies from the operation of s 129. It may be that the common law position of the implication of tenancies from year to year was a matter relevant to its inclusion: Bank of Victoria v M'Hutchison (1881) 7 V.L.R. 452; Box v Attfield (1886) 12 V.L.R. 574; however this provision was retained after the introduction of s 127 in the Conveyancing Act precluding the implication of a tenancy from year to year in the circumstances stated within that section. In respect of s 127, the Royal Commission Report included the following: The law relating to tenancies from year to year is not infrequently a source of dispute between a lessor and his lessee holding over on the expiration of his lease, lessors sometimes finding themselves, to their surprise, saddled with the lessee for a period of a year and upwards, lessees sometimes finding themselves compelled to pay a year's rent more than they had bargained for. The section, as drawn, prevents the implication of a tenancy from year to year arising out of the commencement of this Act, and substitutes in its place a tenancy from month to month.

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64 Senior Counsel for the respective parties advised that on their researches no case could be found construing this aspect of s 129(6) and in particular whether it applies to leases or tenancies pursuant to a holding over agreement in a lease. That appears to be the case but there have been cases construing similar provisions in other statutes to which I refer below. 65 The plaintiff submitted that s 129 applies because one has to take into account the duration of the original lease or tenancy under which, or by virtue of which, the plaintiff is holding over or is in occupation. The Lease was for a period of 18 months from 18 August 2003 to 17 February 2005. The Notice purporting to terminate the Lease was dated 23 February 2006. It was submitted that the tenancy was therefore two and a half years. In support of this submission the plaintiff relied upon the decision of Brereton J in Gill v Wright [1964-5] NSWR 1500 in which his Honour said at 1503: It should be pointed out first that there are two situations concurrently described as "holding over". One occurs under a lease for a term which itself contains the contract for a possible holding over on expiry of the term. In this case "the holding over" is a holding over under and by virtue of the original lease and is a part of the original grant which becomes effective upon a contingency occurring. The other situation occurs where a tenant remains in occupation after the expiry of his term under a lease which contains no such contract. In the absence of any express agreement a new agreement is implied into which are imported so far as applicable the terms and conditions of the original lease, but it is a new lease under a new contract. 66 The term of the tenancy on holding over and the notice required to terminate such a tenancy depend on the agreement for holding over: Bateman v Tsaoucis [1960] S.R. (N.S.W.) 682 (FC). An agreement with some similarities to clause 1.2 was considered in Ex parte Monters Pty Ltd; re Webster [1961] S.R. (N.S.W) 354 . The clause in question in that case was, "that if the said lessor permits the said lessee to continue in occupation of said premises after expiration of the said term of twelve months the tenancy shall continue as a weekly tenancy only at a rental of 6p 10s per week to be determined by a week's notice in writing from either party hereto" (at 522). Owen J, with whom Maquire and Wallace JJ agreed, said at 356: The question then is whether the lessee in the present case is occupying the flat under the registered lease and its holding over clause, or he is in occupation under an agreement partly in writing but constituted also by words or conduct, namely by the grant of permission to occupy coupled with occupation and payment of rent in pursuance of that grant. The conclusion to which I have come is that the true position is that the lessee is in occupation under the registered lease. The holding-over clause provides that if certain events occur the tenancy "shall continue" on certain terms therein stated, including, of course, such terms as would be implied by law. I do not construe the clause to mean that if after expiration of the term of 12 months the lessor permits the lessee to remain in occupation and the lessee does remain in occupation pursuant to that permission, a new term under a new agreement is created. The registered lease contains the contract of letting under which the flat is occupied although the contract was to come into effect only if at the expiry of the twelve months two conditions were fulfilled. It was submitted, however, that this was not so because on the expiry of the term of twelve months the parties might have agreed on terms different to those contained in the document. Obviously this could have happened, but if it had I think it would be clear that the premises were no longer subject to the registered lease, even though some of the terms might be incorporated in the new tenancy agreement. 67 The plaintiff submitted that if the holding over is of the first kind referred to by Brereton J in Gill v Wright, then the plaintiff is in occupation pursuant to the "original grant" and the tenancy does not fall within the description, "any lease or tenancy for a term of one year or, less" in s.129(6) of the Act. Gill v Wright and Ex parte Monters were both cases in which the Courts were construing the holding over agreements in the context of whether the provisions of the Landlord and Tenant (Amendment) Act 1948 applied. 68 RT & MI Abela Pty Ltd v Esso Australia Ltd (1989) 89 ALR 485, Hill J said, at 499, that "no property lawyer would regard a holding over as being possession during the term of the lease" but suggested that "something may turn upon the form of the particular holding over clause". The agreement contained in clause 1.2 of the Lease is that if the defendant allows the plaintiff to occupy the Premises after the Expiry Date, which is what happened, then the plaintiff "does so", that is, occupies that Premises, as a "monthly Lessee". The heading to the clause is "Monthly Tenancy". The words in brackets "other than under a grant of a further lease" read with the provision that the plaintiff occupies the premises after the Expiry Date as a "monthly Lessee on the terms and conditions of this lease with the necessary changes applicable to a monthly tenancy" suggest that the Lease "as renovated" governs the relationship: Right v Darby (1786) 1 T.R. 159; Dougal v McCarthy [1893] 1 QB 736. The expression "on the terms and conditions of this lease" may be compared with the expression "in a Lease the provisions of which will be the same as those in this lease". The latter expression would suggest the grant of a new or different lease, (as opposed to "a grant of a further lease") and would mean a new tenancy rather than the continuation of the tenancy under the existing Lease with amended provisions.

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69 Clause 1.2 (a) provides that rent is an amount equal to one twelfth of the Rent payable immediately before the Expiry Date or as notified by the defendant. The rental therefore is linked to the amount in the Lease. Clause 1.2 (c) requires "three month's notice" for the termination of the "monthly tenancy". All these matters suggest that the occupancy by the plaintiff after the Expiry Date is of the first category referred to by Brereton J in Gill v Wright. It suggests that the Lease continues with the applicable "changes", but the question is what is the "term" of the Lease or tenancy as that expression is used in s 129(6), in the provision, "for a term of one year or, less". There is also the question of how and when the "term" of a lease or tenancy, within the meaning of that expression in s 129(6), is to be calculated. 70 Accepting that clause 1.2 provides it is a "monthly tenancy", and accepting that the plaintiff is occupying the Premises as clause 1.2 provides as a "monthly Lessee", what is the "term" of the tenancy? In Elrington v Judd (1964) S.R. (N.S.W.) 150, Herron CJ, with whom Ferguson & Asprey JJ agreed, after reviewing the relevant authorities dealing with tenants holding over, said at 153-154: It will be seen, by reference to the authorities cited by text writers, that a wide field of obligations has been imposed on tenants who hold over, or, more correctly stated, continue tenancies as periodic tenants, although many of the authorities relate to tenancies from year to year. 71 In Burdekin v Commissioner of Stamp Duties (1961) S.R. (NSW) 514, the Full Court (Herron J, Sugerman & Else-Mitchell JJ) considered an appeal by stated case by the Commissioner of Stamp Duties in relation to the applicable amount of stamp duty on a lease the relevant terms of which were: "(2) The term of the tenancy shall be one month and thereafter from month to month and the demised premises shall not be used by the lessees for any other purpose than an estate office; (3) The rent shall be the sum of seventeen pounds per calendar month". 72 Paragraph 1 of Schedule Two of the Stamp Duties Act 1920-1956 provided for two classes of lease: "(1) where the lease is for a term of one year or upwards; (2) where the lease is for a term of less than one year". The critical question was whether the lease was for a term of less than one year. The Commissioner sought to bring the lease to duty under paragraph (6) of the Schedule which related to a lease "of any other kind whatsoever" to which the duty was fixed at a flat rate of 30s 0d. The Commissioner argued that the relevant provision only applied to leases that had fixed or definite terms of less than one year and had no application to periodic tenancies. Herron J said at 516-517: If the Commissioner's contention is correct the words "fixed" or "definite" will have to be interposed before the word "term" in par. (b). I see no valid reason for so qualifying the word "term". Authorities show that a monthly tenancy creates a term of one month. The position was examined by this Court in Commonwealth Life (Amalgamated) Assurance Ltd v Anderson (1945) 46 S.R. (N.SW) 47. Jordan C. J. held that if the letting gives exclusive possession to the tenant and is for a specified period, it is a lease for a term however short the period or periods, continuous or discontinuous, during which it confers rights of exclusive possession. Thus a tenancy from year to year creates a term of at least one year. His honour added (at pp. 50, 51): "I see no reason in principle for differentiating between a tenancy from year to year and any other form of periodic tenancy. Whether the tenancy be from year to year, quarter to quarter, month to month, or week to week, it is a tenancy for a definite term of the year, a quarter, a month, or a week, as the case may be, with the superadded provision that it is to continue for another definite term of the same period, unless, by proper notice to quit, it is terminated at the end of the first period, and so on from period to period: Precious v Reedie (1924) 2 K.B. 149; Land Settlement Association Ltd v Carr (1944) 1 K.B. 657. We are in the present case concerned with a tenancy from week to week. Such a tenancy creates a term of at least one week." In Amad v Grant (1947) 74 CLR 327 at p. 337, Latham CJ pointed out that a periodic tenancy, whether it be yearly, quarterly, monthly or weekly, is not a series of separate tenancies, but is a single tenancy which continues until it is duly determined. Thus the notice to quit must expire at the end of a period of the tenancy. In Hammond v Farrow (1904) 2 K.B. 332, it was held that a tenancy from week to week determinable by a week's notice on either side is a tenancy for "a term not exceeding three months". Although the decision rested on the special provisions of a rating Act, the reasons are applicable here, especially those of Wills J (at p. 335). Precious v Reedie , is in favour of the proposition that a periodic tenancy creates a term, although not a fixed term. See also Ex part Calgaro; Re Aloisi (1949) 66 W.N. (N.S.W.) 223. The lease in the instant case provides that "the term of the tenancy shall be one month". This is for a term of less than one year.

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73 Sugerman J also reviewed the authorities (518-521) and said at 520-521: Doe D. Chadborn v Green (1839) 9 Ad. & E. 658; 112 E.R. 1361, was a case of the same class as the present case; that tenancy was " for one year from the date hereof, and so on from year to year, until the tenancy hereby created shall be determined as after mentioned …". It was further agreed that it should be lawful to determine the tenancy by three months' notice. In holding that the tenancy was not determinable by three months' notice expiring before the end of the second year, Lord Denman C. J. said at p. 661; p. 1362: "We consider, therefore, that the notice in the present case was insufficient under the terms of the contract, which gives a term for a year and so on from year to year. This is consistent with the doctrine laid down in Birch v Wright (1786) 1 T.R. 378; 99 E.R. 1148, and with sound reason; for the language of the contract clearly contemplates a term longer than one year". See also In re Searle (1912) 1 Ch. 610. Thus far it appears that a periodical tenancy is a tenancy for a term. Its term is the period for which it must endure. This, according to the more recently expressed view, is a year, a quarter, a month, a week or as the case may be. But the duration of tenancies which are expressed to be for a specified period followed by a periodical tenancy is governed by the considerations stated in Doe D. Chadborn v Green . … A periodical tenancy, as the authorities show, is no more than a tenancy which in its inception is for a definite term but is capable at the expiration of that term of extending into a tenancy for a longer term. Such extension does not take place without the assent of both parties, but the assent is manifested in a particular manner, namely, by each party's refraining from giving the required notice. 74 In this case the Lease was for a "specified period" being from 18 August 2003 to 17 February 2005 and thereafter, on the occurrence of the contingencies referred to in clause 1.2, as a monthly tenancy, or from month-to-month, determinable on three months notice. Accordingly the Lease is for "a specified period followed by a periodical tenancy and is governed by the considerations in Doe D. Chadborn v Gree". Applying those considerations, this is a Lease clearly contemplating and in fact becoming a term longer than one year and the provisions of s 129(1) apply to it. 75 Burdekin v Commissioner of Stamp Duties is distinguishable from the present case in that the Court was construing the provisions of the Stamp Duties Act and the character of the lease had to be determined at the time the lease was executed. In this regard Else-Mitchell J said at 522: The possibility that a lease which, in its inception is for a term of two months, may, by the omission of both parties to give the appropriate notice, become a lease for a term of three months or for any number of months does not, in my opinion, prevent its being a lease for a "term", and for a "term of less than one year". Since the lease must be presented for stamping within a prescribed period after its execution, its character must be determined as at its commencement, and not in accordance with the events as they may happen … and, in my opinion, it must be determined according to the rights of the parties as they appear from the instrument and not by reference to the possible results of the subsequent conduct of the parties. 76 In RT & MI Abela Pty Ltd v Esso Australia Ltd (1989) 89 ALR 485, Hill J considered relevant provisions of the Petroleum Retail Marketing Franchise Act 1980 and the status of the applicant's occupancy of a particular service station in circumstances where it had "held over" under the terms of a franchise agreement. The relevant expression in the section provided for the "term" of a franchise agreement to be "one year or less, or 3 years or more" (s 13(3)). Hill J had to consider the same question that arose in Burdekin, as his Honour posed it, whether the "term" of the lease had to be calculated "at its commencement so that no account can be had to what has happened", or may the "term" be calculated "by reference to actual occupation so that provided the holding over continues, the occupancy under the holding over provision of a lease is part of the term of the original lease?" (at 494). Hill J was of the view, without regard to authority, that the legislation required that the "term" be calculated at the time the agreement was entered into or renewed. 77 The provisions of s 129 of the Conveyancing Act 1919 are concerned with quite different circumstances than the imposition of stamp duty on the actual instrument as in Burderkin and/or the terms of franchisee agreements under the legislation Hill J was considering in RT & MI Abela Pty Ltd v Esso Australia Ltd. They are concerned with providing to a lessee or tenant, who has a lease or tenancy for more than one year, the protection of the provisions of s 129(1). They are also concerned with alleviating the burden on a lessor or landlord of having to provide an opportunity to a short-term (one year, or less) lessee or tenant to rectify a breach before exercising rights of re-entry. 78 There is a question as to whether the provisions of s 129(6) apply to periodic tenancies at all, but on the assumption that they do, the question is whether the application of the exclusionary provision is to be determined at the inception of the first period, as Else-Mitchell held in Burdekin v Commissioner of Stamp Duties, or at the time a notice purporting to terminate the Lease or tenancy is served. In Burdekin, as noted above, the legislature was directed to an assessment of duties on instruments at a time shortly after their execution. The provisions of s 129 are directed to providing a reasonable and fair regime as between lessee/landlord and lessee/tenant based in part on the duration of that relationship. It seems to me that the legislature would not have intended that a tenant who had been in premises as a periodic tenant for say, three years, on periods of month after month, would not have the benefit of the protection of s 129(1). Applying the approach adopted by Sugerman J in Burdekin, (and distinguishing that of Else-Mitchell), it is appropriate to assess the length of the "term" of the lease or tenancy by reference to the "subsequent conduct of the parties" to determine whether the "term" has been extended. 79 Taking only the "monthly tenancy" alone without reference to the term from August 2003; this was a tenancy at its inception for a definite term capable at the expiration of that term of extending into a tenancy for a longer term. The periodic tenancy commenced on 18 February 2005 and at the time the purported notice was served, 23 February 2006, the tenancy (or the "single tenancy": Amad v Grant (1947) 74 CLR 327 at 337) was for more than one year, thus s 129(1) applied to the tenancy. 80 The fourth defendant was required to serve a notice pursuant to s 129 (1) prior to exercising its rights pursuant to clause 1.2(d) of the Lease.

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