In the matter of Hi-Fi Sydney Pty Ltd (Administrator Appointed) [2015] NSWSC 1312

In the matter of Hi-Fi Sydney Pty Ltd (Administrator Appointed) [2015] NSWSC 1312 - NSWSC 2015 case summary — Zoe

Clause 14.1 of the lease provided that the tenant must not deal with the lease or the premises. "Deal" is defined as meaning "assigning or transferring the lease, demising the subletting, licensing or parting with or sharing possession of the premises, disposing of the premises or the lease or the tenant's estate or interest in the premises or becoming the trustee of a trust in respect of the lease". Clause 14.2 provided as follows: 14.2 Assignment of lease Despite clause 14.1, the Tenant may assign this lease with the Landlord's consent (which consent must not be unreasonably withheld) if: (a) at least 21 days before the proposed date of assignment, the Tenant: (i) requests the consent of the Landlord to the proposed assignment; (ii) gives the Landlord the name and address of the proposed assignee; (iii) gives the Landlord: (A) at least 2 references as to the proposed assignee's financial circumstances; and (B) at least 2 references as to the proposed assignee's business experience, showing, to the Landlord's reasonable satisfaction, that the proposed assignee is a respectable, responsible, solvent person of high financial standing with at least equal trading and turnover potential and capable of adequately conducting a business substantially similar to that of the Tenant and to a standard substantially similar to that of the Tenant; (b) the Tenant is not in breach of this lease and has not consistently been in breach of this lease; (c) the Tenant executes and procures the assignee to execute a deed of assignment of this lease in the form required and prepared by the Landlord, which deed provides that the assignee covenants to comply with all the Tenant's obligations and liabilities under this lease and contains either: (i) a warranty by the Tenant that the Tenant is not aware of any unresolved claims against the Landlord in respect of or in any way arising from this lease; or (ii) a list of any unresolved claims by the Tenant against the Landlord in respect of or in any way arising from this lease; (d) the Tenant procures the assignee to produce any additional security (including guarantees) reasonably required by the Landlord; (e) the Tenant pays all the Landlord's costs (internal and external) in relation to considering and granting or refusing its consent to the proposed assignment and in preparing, negotiating and completing the deed of assignment of lease; and (f) the proposed assignment does not result in a change in the Permitted Use.

[4]

Applicability of Conveyancing Act, s 129

I turn then to the first issue, which is whether Conveyancing Act, s 129, applies. As I have indicated in the above summary of the factual situation, the only default in respect of which notice of default was given, and subsequently the only default relied on as founding the termination of the lease, is the appointment of an administrator within cl 22.1(d)(iii) of the lease, which I have set out above.
CIPL submitted that suffering the appointment of an administrator, while an event of default under cl 22.1, was not a breach by the lessee of a covenant, condition or agreement such as to fall within Conveyancing Act, s 129. For that submission, CIPL invoked the judgment of Bryson J in Melacare International Ltd (in receivership) v Daley Investments Pty Ltd (1999) 9 BPR 17,095; [1999] NSWSC 496, in which his Honour said (at [12]): The statutory power to grant relief against forfeiture of leases created by subs 129(2) of the Conveyancing Act, 1919 is a discretionary power; there is no need for a lessee seeking relief to show an equitable ground for intervention. To my mind it is doubtful whether s 129 applies in the present case, having regard to its application to a right of re-entry or forfeiture for a breach of any covenant, condition or agreement in the lease. In this case the right of termination relied on does not turn upon any act or omission of the plaintiff or anything which could be called a breach by the plaintiff of a covenant, condition or agreement, or a breach capable of being dealt with by a notice specifying a particular breach and requiring remedy, such as is contemplated by subs 129(1). If the condition in which the right of termination occurs it occurs irrespective of any act or omission of the lessee and in circumstances where there cannot be said to have been a breach of a condition, or any breach, by the lessee or otherwise.
In that case, the relevant event was the appointment of a receiver and manager. Although his Honour proceeded on the basis just set out, it will be observed that in so doing his Honour appears to have entertained a measure of doubt. In fact, there is significant authority to the contrary, holding that an event such as the appointment of receivers and managers or going into bankruptcy does, in the context of Conveyancing Act, s 129, and its equivalents, constitute a breach of a condition for relevant purposes. In this respect, reference might be made to Halliard Property Co Limited v Jack Segal Ltd [1978] 1 All ER 1219; [1978] 1 WLR 377 (Goulding J) and to Cadogan Estates Ltd v McMahon [2001] 1 AC 378; [2000] 4 All ER 897.
Closer to home, in Della Imports Pty Ltd v Birkenhead Investments Pty Ltd (1987) NSW ConvR 55-358; [1987] ANZ ConvR 294, McLelland J (as the later Chief Judge in Equity then was), addressed the question. Clause 13 of the relevant lease provided that the appointment of receivers was an event of default. His Honour said (at 57,233): However this may be, I am of the opinion that the right of re-entry conferred by CL13(a)(vii) is a "right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any ... condition ... in the lease", within the meaning of s129(1) of the Conveyancing Act 1919, which would not be enforceable by Birkenhead unless and until notice were given under that sub-section, and in respect of which Della might apply for relief against forfeiture under s129(2). At this stage it cannot be said that relief against forfeiture would necessarily be refused. I think that a provision in a lease which provides for re-entry or forfeiture on the happening of any particular stipulated event, regardless of whether or not there is any obligation on the lessee to prevent that event occurring, is a "condition" within subs(1) of s129. I think that the word "breach" in that sub-section is equivalent to "non-fulfilment". I think that this interpretation of s129 is supported first, by the evident policy of the provision which would otherwise be manifestly inadequate for the protection of lessees which it obviously is intended to confer and, secondly, by the reference in pars (c) and (e) of subs(6) of s129 to "a condition for forfeiture on the taking in execution of the lessee's interest" in certain types of lease, non-fulfilment of which would not normally amount to a breach of any contractual provision in the lease but simply be an event which might occur.
In Wynsix Hotels (Oxford Street) Pty Ltd v Toomey (2004) 17 BPR 32,633; [2004] NSWSC 336, Young CJ in Eq, after considering all three authorities to which I have referred, said (at [53]-[54]): [53] The matter does not need to be decided in this case. However, with respect, I would follow the approach of McLelland J. If that were wrong, I would concur with Goulding J and give s 129 a wide operation. I think this view is reinforced by s 129(10). [54] The right to terminate on the happening of an event that the lessee has a receiver appointed comes very close to a negative covenant promising not to have a receiver appointed…
it does not appear that Bryson J was referred to any of Halliard Property Company, Cadogan Estates or Della Imports in Melacare.
To my mind, it is also significant that s 129(1) speaks not only of a breach of a covenant or agreement, but also breach of a condition. In my view, there is no artificiality or strain in seeing a lease which provides for termination upon a specified event occurring as being conditional upon such an event not occurring. Where that event occurs, there is in effect a breach of a condition of the lease. Essentially, cl 22.1(d)(iii) made this lease subject to a condition that the lessee not suffer the appointment of an administrator. If that condition were breached, an event of default occurred entitling the lessor to terminate subject to giving the requisite notices.
It follows that, in my opinion, and notwithstanding Bryson J's observations in Melacare, the weight of the authorities favours the view that for the purposes of s 129, an event of the relevant kind is a breach of a condition within s 129. Unaided by authority and construing the section on its face, for the reasons given by McLelland J, Goulding J, Young CJ in Eq and the additional reasons given above, I would come to the same view. Accordingly, s 129 is applicable and available in respect of the event of default referred to in cl 22.1(d)(iii).
It is all the more clearly applicable and available in respect of the other breaches on which the plaintiff ultimately sought to rely, which were essentially breaches of the covenant in cl 14.1 not to deal with the lease. Clause 14.1 contains a positive promise or covenant and a breach of it plainly falls within s 129.

[5]

Whether relief should be granted under Conveyancing Act, s 129

Having concluded that s 129 is available, I turn then to the second issue, which is whether relief should be granted under that section.
In Wynsix, Young CJ in Eq suggested that the approach at general law and the approach under s 129 were very similar [see Wynsix, [21]]. As Bryson J indicated in Melacare, however, the jurisdiction under s 129 is at least arguably broader, because it is not essential to establish an equitable ground for intervention, it being a discretionary statutory power.
So far as the equitable jurisdiction is concerned, Lord Wilberforce explained in Shiloh Spinners Ltd v Harding [1973] 1 All ER 90; [1973] 2 WLR 28; [1973] AC 691, 722-723, that there were three situations where equity gives relief: first, where it is possible to state that the object of the transaction and of the insertion of the right to forfeit is essentially to secure the payment of money; secondly, where there has been fraud, accident, mistake or surprise (the traditional heads of equitable jurisdiction); and thirdly, where the primary object of a bargain is to secure a stated result which can be effectively obtained when the matter comes before the court and where the forfeiture provision is security for the production of that result [see also Wynsix, [20]].
The considerations applicable on an application for relief against forfeiture, at least in this general context, were summarised by Keane JA (as his Honour then was) in Ace Property Holdings Pty Ltd v Australian Postal Corporation [2011] 1 Qd R 504; [2010] QCA 55, [163], as involving the conduct of the applicant for relief, including whether the default was inadvertent or wilful; the gravity of the breaches; the damage to the covenantee or lessor; the relative loss to the covenantor or lessee; and the disparity between the value of the property forfeited and the damage caused by the breach.
The first and third of the Shiloh Spinners categories have as their essential touchstone that the forfeiture is seen in equity, like other forms of security, as a means of securing the bargain, and not of providing to the secured party benefits over and above what are necessary to achieve that end, nor to impose on the party giving security a penalty or sanction over and above the primary purpose of the bargain. That notion underlies much of the approach of equity to the law of penalties and forfeiture.
In the present context, that then begs the question, what is the primary object of the bargain and, in particular, of cl 22.1(d). In Melacare, Bryson J suggested that the purpose of such a clause was (at [17]): plainly enough to protect the lessor against being held in a continuing relationship with a lessee which was not financially responsible and was not able to sustain the relationship.
I would perhaps state it slightly, but not very, differently, as being to protect the lessor from being required to continue to suffer an insolvent tenant.
Arguably, such provisions might also have as their purpose the protection of the lessor from any requirement to deal with an insolvency administration - whether involving an administrator, a deed administrator or a liquidator. However, that purpose would cut across the statutory policy embodied in Corporations Act, Pt 5.3A - especially, first, s 440B, which prevents re-entry during administration, and secondly, s 444F, which authorises the Court in connection with the deed of company arrangement to make an order that a lessor not retake possession of premises if its interests can be adequately protected. That said, it seems to me that essentially underlying these provisions is the idea that the lessor should not be required to continue to suffer an insolvent tenant with the associated risk that the rent will not be paid.
The current situation is that the rent has been paid in full up to date. The arrears have been cleared, and since the company went into administration the rent has been paid punctually during the period of administration. Moreover, Ms Hamblin, who the evidence establishes is a person of considerable substance, proffers undertakings to replace and/or replenish the security deposit and bank guarantee required under the sublease, to provide financial support to the company in the event that it is unable to meet its obligations under the sublease from its own resources, and otherwise to ensure that the company complies with its obligations under the sublease.
Secondly, as a result of the deed of company arrangement, the company will no longer be insolvent, and both its operating results since the change in management, and more significantly the undertakings to which I have just referred, offer a real prospect that it will no longer be a troublesome tenant.
Thirdly, and importantly, the lessor has suffered no damage from the breach of lease in question. This has often been treated as significant; for example, in Pioneer Gravels (Qld) Pty Ltd v T & T Mining Corporation Pty Ltd [1975] Qd R 151, Hart J, with reference to the third category of situations spoken of by Lord Wilberforce in Shiloh Spinners, said (at 161): But he also speaks of securing "a stated result" and of securing "the essentials of the bargain". Clearly he was thinking of cases in which the lessor had suffered some loss or damage, which could be put right. I think that a fortiori relief should be granted in a case where no loss or damage has been suffered, so that there is nothing to be put right.
Fourthly, if relief is not granted, the lessor will gain and the lessee will lose the benefit of the expenditure of $2.6 million or so on fit-out and establishment costs. This too is a significant, though by no means determinative, consideration [see Wynsix (at [63]-[70]), where Young CJ in Eq said that such circumstances "make it more likely relief against forfeiture should be given rather than less likely"].
Fifth, it was submitted that the default in this case was not the wilful act of the company. However, I see that of limited significance in circumstances where it is a consequence, in reality, of the company's then insolvency. That view is reinforced by the circumstance that it was the deliberate act of the secured creditor, who now is the new controller of the company and the real party interested in seeking relief against forfeiture. Indeed, if the appointment of an administrator had occasioned any damage of substance to the lessor, this would have been a most significant factor telling against granting relief. Where a party takes a deliberate act that damages the lessor's position, forgiving that with a grant of relief against forfeiture would be a much more difficult exercise. However, it is of slight significance where the result has been essentially the reconstruction of the lessee and ultimately, if anything, an improvement in the position of the lessor.
The plaintiff raised in opposition to the grant of relief against forfeiture two additional matters. The first was the impact of granting such relief on the position of the former director of the company, Mr O'Sullivan, who guaranteed the performance of the lessee's obligations under the lease.
The guarantee is contained in cl 27 of the lease and was that the tenant would pay the guaranteed money on time and comply on time with the tenant's obligations under the lease. It included an indemnity in respect of all actions, liabilities, penalties, claims, demands, loss or damage incurred or suffered directly or indirectly in connection with the tenant not paying the guaranteed money on time, not complying on time with the tenant's obligations under the lease or the landlord not being able to recover all of the guaranteed money from the tenant or enforce all of the tenant's obligations under the lease. The guarantee was expressed to be independent of and in addition to the security agreement and, importantly, to continue (despite termination or assignment of the lease) until the landlord unconditionally released the guarantor in writing, or until all of the guarantor's obligations were satisfied. Provision was also made, by cl 27(8), that despite any other provision in the lease, if the rights provided for by the lease and the obligations of the tenant were terminated, the liability of the guarantor would remain as if the rights and obligations remained in force.
The plaintiff's point was in essence that Mr O'Sullivan was not a party to the proceedings and granting relief against forfeiture would affect his position by resurrecting obligations which he no longer had. I do not agree. As will be apparent from the provisions of the guarantee to which I have referred, the guarantee is a continuing one and has not come to an end by termination of the lease. Relief against forfeiture would not, in any event, impose on Mr O'Sullivan any obligation which he had not already undertaken by giving the guarantee in the terms in which it was given. In my view, he is not a necessary party to the suit for relief against forfeiture.
The second argument advanced was that if relief were granted and the lease reinstated, the lessee would immediately be in breach of other covenants on account of which the lease would be liable to forfeiture. Reference was made, in particular, to breaches of the covenants not to deal with the lease contrary to clauses 14.1 and 14.4, referred to above.
As to this argument, while the rule is not absolute, at least generally speaking a lessor is not entitled to rely, in opposition to an application for relief against forfeiture, on breaches of the lease which could have been the subject of a s 129(1) notice but have not been the subject of any such notice. In Tutita Pty Ltd v Ryleaco Pty Ltd (1989) 4 BPR 9,635; (1989) NSW ConvR 55-486, Meagher JA, with the concurrence of Priestley and Clarke JJA, referred in this respect to the judgment of Hope J in Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Coy of NSW Limited (1970) 2 BPR 9,562, and said: 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 those circumstances 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 (e.g. 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 sublease in question.
The relevant matter which it was urged should be, but the Court held ought not be, taken into account was the failure to obtain the consent to a sublease, not of the lessor, but of the mortgagee. His Honour added: If, contrary to my view, one takes into account the failure to obtain the mortgagee's consent, one should also take into account that that failure did not apparently operate to the prejudice of the mortgagee.
That consideration is also, mutatis mutandis, relevant here.
In Wynsix, Young CJ in Eq observed (at [25]): …a landlord in a relief against forfeiture case is not entitled to rely on any ground which could have been the subject of a s 129 notice but in respect of which no s 129 notice was issued. That decision [referring to Pioneer Quarries v Permanent Trustee] has been followed on many occasions since, including by the Court of Appeal in Tutita Pty Ltd v Ryleaco Pty Ltd (1989) 4 BPR 9635…
See also Mineaplenty Pty Ltd v Trek 31 Pty Ltd (2006) 17 BPR 32,645; (2007) ANZ ConvR 123; [2006] NSWSC 1203, [68].
Although the position is not on all fours with this case - because it concerned whether an option had been validly exercised, rather than an application at the outset for relief against forfeiture - there is a close analogy with the position that confronted McLelland J in Della Imports, where it was argued that an order for specific performance requiring the grant of a renewed lease upon exercise of an option should not be made because doing so would only result in the lessee being immediately in default of the provision of clause 13, providing that the appointment of a receiver was an event of default. As is apparent from the passage from his Honour's judgment which I have already set out above, his Honour concluded that the appointment of the receivers and the provisions of clause 13 did not, of themselves, provide a defence to the application for specific performance because it could not be gainsaid that a notice under s 129 would have to be given if specific performance were granted before that breach could be relied upon to terminate the lease, and the possibility that relief against forfeiture would be granted could not be excluded.
The defendant argued that clause 14.2 was not engaged because the change in control of the company was not an act of the lessee, but something undertaken by a shareholder, or the administrator. In this respect, reference was made to the judgment of Finkelstein J in Lindholm Re Munday Group Pty Ltd (recrs and mgrs apptd) (in liq) v Tsourlinis Distributors Pty Ltd [2011] FCA 195, where his Honour observed (at [48]) that clause 16.5 of the lease there in question provided that where any "act of the tenant" required the landlord's consent, the landlord should not unreasonably withhold its consent, and that that provision may not apply because a change in the effective control of the tenant - that is to say, a change in shareholding - was not an act of the tenant, but an act of the shareholders. But, plainly, his Honour was concerned with the terms of the lease in question in that case. In this case, the terms of clause 14.2 and 14.4 read together make it quite plain that any change in effective control of the composition of the board of directors in the tenant is deemed to be an assignment of the lease that requires the consent of the landlord under clause 14.2. The terminology of "act of the tenant", or anything like it, does not appear and is not relevant in the context of this lease.
Accordingly, it seems to me that there were, at least arguably and probably more than arguably, prohibited dealings with the lease by the grant of a right of occupation, albeit not exclusive occupation, to Max Watts Operations by the licence in March 2015, and by the change in shareholding pursuant to the deed of company arrangement whereby Karamika gained effective control of the composition of the board of directors of the company and the ability to cast more than one half of the maximum votes and control of more than half of the issued capital. It is not in doubt that the plaintiff has not consented under clause 14.2 to those dealings. That said, steps were taken to obtain such consent, though unsuccessfully. A letter of 18 May 2015 from the solicitors for the administrator to the solicitors for CIPL requested not only that the purported termination of the lease be retracted, but consent to the lease being assigned to Max Watts Operating.
That was not the only, nor the first such request. Some financial information as to the circumstances of Karamika and Ms Hamblin had been provided in conjunction with earlier requests. None of this produced any request for further information on behalf of the lessor, though the lessor now says that not all requisite information had been provided. Ms Hamblin, who gave evidence, was not cross-examined on any matters going to her, or her company's, fitness or capacity as a tenant. No reason was given for the refusal of consent, save that the lease was no longer on foot, it having been terminated. Indeed, the plaintiff's witness and asset manager, Mr Schloss, who gave evidence, conceded that the company in its reconstructed form under Ms Hamblin's management and control, was a superior alternative to the company under its former management.
It cannot be disputed that a significant motivating factor in the plaintiff taking the approach it has has been its desire to achieve greater flexibility in respect of the tenancies at the Entertainment Quarter and, in particular, to be able to grant a lease for a significantly shorter term to a preferred tenant with a good track record in the relevant industry. There is nothing illegitimate or improper about that, but it goes beyond securing the legitimate interests of the lessor under the lease, and it goes beyond securing the main objects of the bargain contained in the lease. Essentially, it amounts to taking advantage of the default to secure an additional benefit not necessary to secure CIPL's rights as lessee.
At a minimum, as it seems to me, the possibility cannot be excluded that if relief against forfeiture were granted in respect of the only breach currently relevant - that is to say, the appointment of the administrator - that relief would in due course not be granted in respect of the breaches of clause 14, to which I have referred, if a s 129 notice were now given in respect of those breaches. Accordingly, at the least, relief should be granted in respect of the default constituted by the appointment of an administrator.
That would leave, potentially for later litigation, the question as to whether there were breaches of cl 14 and, if so, whether relief should be granted in respect of those additional breaches. The question is whether it is appropriate that that question await later litigation, at considerable cost to the parties, commercial uncertainty, and the time of the Court - or whether that question can now be resolved.
The issues have been litigated in these proceedings. It might be argued that consent was unreasonably withheld, in that in order to secure the opportunity to enter into a short term lease to a preferred tenant, the request for consent was not given due and proper consideration. However, it is fairly pointed out that, on a proper construction of clause 14.2 and particularly having regard to clause 14.2(b), there was no obligation to consent to an assignment where the tenant was in breach - as, indeed, it was at the relevant time - an administrator having been appointed. Moreover, it is at least arguable that the tenant had not, at least at the relevant time, provided all requisite information to enable the lessor to make a judgment.
I do not need to conclude those issues, because in order to grant relief against forfeiture in respect of the relevant breaches, it is not necessary to find that consent was unreasonably withheld. It is relevant that the breaches appear to have occasioned no damage to the lessor, but, if anything, to have installed a superior lessee to that which preceded it. It is not as if the company proceeded wilfully, without endeavouring to do its best to obtain consent, but it made reasonable efforts to obtain a consent and was met with, first, silence, and, secondly, termination.
It is true that forgiving these breaches may deprive the lessor of the opportunity of negotiating shorter term leases to yet more attractive tenants, but that is not a result to which the lessor is entitled under the lease. The lessor's position in respect of the future conduct of the lessee is amply protected by the guarantees offered by Miss Hamblin, by the reinstated security deposit, and by its ongoing ability to terminate in the event of any further default.
Accordingly, I am of the view that relief should be granted in respect of the alleged breaches of clause 14, as well as in respect of the appointment of an administrator, so as to avoid further disputation on that issue.

[6]

Whether an order under Corporations Act, s 444F, should be made

I turn finally to the question as to whether an order should be made under Corporations Act, s 444F, which relevantly provides as follows: … (4) The Court may order the owner or lessor of property that is used or occupied by, or is in the possession of, the company not to take possession of the property or otherwise recover it. … (5) The Court may only make an order under subsection (4) if satisfied that: (a) for the owner or lessor to take possession of the property or otherwise recover it would have a material adverse effect on achieving the purposes of the deed; and (b) having regard to: (i) the terms of the deed; and (ii) the terms of the order; and (iii) any other relevant matter; the interests of the owner or lessor will be adequately protected.
These provisions give rise to two essential issues. The first is whether the plaintiff taking possession would have a material adverse effect on achieving the purposes of the deed of company arrangement. As securing occupancy rights in respect of the premises is a condition precedent to the DOCA taking effect, that condition precedent would fail if the plaintiff were to take possession and, thus, the DOCA would not take effect and the company would go into liquidation. While I accept that there is not much for creditors in the DOCA, nonetheless, the evidence such as it is - particularly the s 439A report - suggests that it is more than they will obtain in a liquidation. Perhaps more significantly, the purposes of the DOCA and the purposes of Corporations Act, Part 5.3A, are not only the interests of the unsecured creditors, but include preserving the company and its business. There is no doubt that, in so far as it is a purpose of the DOCA to preserve the company and its business, the achievement of the purposes of the DOCA would be adversely affected were the plaintiff to take possession.
The next question then is whether the lessor's interests can be adequately protected. It is worth observing at this point that the terminology of the provision is "adequately", which is to be distinguished from "perfectly" or "completely". It has been held that the relevant interests are those of the lessor qua lessor under the lease - that is to say, receiving the rent and ensuring compliance with the terms of the lease - as distinct from, for example, exploiting a default under the lease to negotiate shorter terms at higher rents with more attractive potential tenants [see Strazdins Re DNPW Pty Ltd v Birch Carroll & Coyle Ltd (2009) 178 FCR 300; (2009) 72 ACSR 563; [2009] FCA 731, [15]-[17] (Lander J)]. The plaintiff submitted formally that this holding in Strazdins was wrong. While I record that submission, it seems to me not only that I would follow Lander J in the absence of being persuaded that his Honour was plainly wrong - especially where the judgment of a court of coordinate jurisdiction under national legislation such as the Corporations Act is concerned - but approaching the matter independently, untrammelled by authority, I would have come to the same conclusion as his Honour.
As I have observed, in this case the rent has been paid and the lessor will have the benefit of a bank guarantee and of Ms Hamblin's undertakings to pay promptly and her proven capacity to do so. It seems to me that under these arrangements the lessor will be not only no worse, but better, off than under the pre-existing arrangements.
It was argued that the absence of the ability under s 444F to reinstate Mr O'Sullivan's guarantee meant that this would be an immeasurable detriment to the lessor, but that guarantee will be replaced by Ms Hamblin's guarantee. There is some, albeit slight, evidence in the administrator's report that Mr O'Sullivan's guarantee is likely to be worthless. There is much better evidence that Ms Hamblin's guarantee is likely to be of substance and valuable. I do not need to be satisfied that the interests of the lessee are completely or perfectly protected, but only that they will be adequately so, and I am satisfied that the security offered by Ms Hamblin will adequately protect the lessor's interests.
While observations have been made in Re Lindholm by Finkelstein J to the effect that there are enormous difficulties with s 444F(4), I am unpersuaded. Lander J in Strazdins has demonstrated how the section can beneficially be employed. The circumstance that a statutory power of that kind when given to a Court might appear to be radical and unusual is not a reason to be unduly coy in its use. It is given to a Court because Parliament intends the Court to have and use that power in an appropriate case, not to refrain from doing so or pretend that the power is so difficult that it does not exist.
Accordingly, if I had not come to the conclusion that relief against forfeiture should be granted, I would have made an order restraining the lessor from taking possession upon terms that the company comply with the obligations of the lessee under the lease for the term of the lease (and any renewed lease under the option) other than those defaults in respect of which I have indicated relief against forfeiture would be granted.

[8]

Costs

On the question of costs, I am content to adopt the summary of Chadwick LJ in Bland v Ingram's Estates Ltd (No 2) [2001] EWCA Civ 1088; [2002] Ch 177; [2002] 1 All ER 244; [2002] 2 WLR 361, [14], as providing the guiding principles for the consideration of costs in connection with applications for relief against forfeiture. Relevantly, his Lordship said: It is this principle which underlies the practice of requiring the applicant, as a term of relief, to pay the costs properly incurred by the lessor in connection with the re-entry and the proceedings for relief. Accordingly, the applicant will normally be required to pay the lessor's costs of the forfeiture proceedings, save in so far as those costs have been increased by the lessor's opposition to the grant of relief, upon appropriate terms…Prima facie, the costs which the applicant will be required to pay to the lessor as a term of obtaining relief will be assessed on an indemnity basis; if it were otherwise the lessor would not obtain the indemnity against proper expenses to which he is entitled…But, to the extent that costs have been increased by the lessor's unnecessary opposition to the grant of relief, the normal rules apply: the lessor will normally be ordered to pay the applicant's costs on the standard basis, and the applicant will be able to set those costs off against what he would otherwise be required to pay to the lessor as a term of obtaining relief from forfeiture.
I observe that on the first occasion on which reference is made to the lessor's opposition, it is described simply in terms of costs being increased by the lessor's opposition to the grant of relief, and on the second occasion, reference is made to unnecessary opposition to the grant of relief. In neither case does his Lordship refer to unreasonable opposition.
There was nothing unreasonable about the lessor's opposition to the grant of relief in this case; but if the question is whether the opposition was necessary in order to achieve justice for the lessor, it seems to me that it was not. Indeed, it was made clear in correspondence before the proceedings were instituted that guarantees of the kind which have ultimately been reflected in the orders I have made were to be offered by Karamika and Ms Hamblin.
Accordingly, it seems to me that a very substantial part of the proceedings has involved the lessor's opposition to the grant of relief, rather than the mere costs of the lessee bringing the lessor to Court in order to obtain relief. I am conscious on the other hand that the lessee has required relief not just in respect of the breach constituted by the appointment of the administrator, but also the various breaches of cl 14 to which I have referred and in respect of which it seems to me there was no obligation on the lessor to give consent.
On balance, I think justice will be done between the parties if there is no order as to costs.
Accordingly, there will be no order as to costs of the proceedings, with the intent that each party bear its own costs.

At a glance

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Judgment (9 paragraphs)

Legislation Cited (1)

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