1 Within 14 days the parties must bring in short minutes to give effect to these reasons.

2 Costs reserved.

3 Adjourned to directions hearing 9:30 am 6 May 2005 at 55 King Street, Melbourne.

1 In 2001 Hualon Developments Pty Ltd entered into a lease with Industrial Services Pty Ltd for a term of five years. The lease related to some four parcels of land, namely 58-64 Latrobe Street, Melbourne, 54-56 Latrobe Street, Melbourne both of which properties contain buildings, respectively a four storey building on the first property and a two storey building on the second property. There is at least one sub-tenant with regard to these buildings, namely Oceanic Polytechnic, an educational institution. The lease also extended to two lots partly contiguous with the Latrobe Street allotments with frontages to MacKenzie Street, namely Nos. 9-39 MacKenzie Street. The lease contained a special condition which is at the heart of the present dispute. Clause 3.2 of the lease provided:

Despite any other provision of this lease, if the Lessor decides to demolish or redevelop the premises, the Lessor may end this lease by giving the Lessee 3 months' written notice, which notice may be given at any time.

If a notice is given by the Lessor under clause 3.2:

(a) this lease is ended with effect from the date specified in such notice and the Lessee must, on that date, vacate and deliver up the Premises in accordance with clause 11 of this lease;

(b) the Lessee must continue to observe and perform all of its covenants and obligations under this lease up to the date specified in such notice; and

(c) no compensation is payable by either party as a consequence of the early termination of this lease;

3 Industrial used the part of the premises which was not sub-let for the purposes of a commercial car parking business. In 2004 companies described as members of the Drapac Property Group investigated the purchase of the demised premises. The properties being offered for sale by Hualon included not only the demised premises but also the adjacent, No. 52 Latrobe Street.

4 On 10 August 2004 three companies being members of the Drapac Property Group (and from their names, the three respondents in this proceeding; 52-64 Latrobe Street Pty Ltd, 9-23 MacKenzie Street Pty Ltd, 27-39 MacKenzie Street Pty Ltd, one would infer that these companies are what are described commercially as special purpose vehicles) agreed to purchase the demised premises.

5 The purchase was completed on approximately 13 January 2005 and was financed by a complex of loan agreements giving a total amount financed at of $11.475m. This finance was arranged through Balmain N.B. Commercial Mortgages Ltd, and Colonial First State Investments Ltd. There were three loan agreements involving trustee companies.

6 On 20 January 2005 the respondents wrote a letter requiring the vacation of the premises. That letter provided as follows:

We refer to the lease between Hualon Development Pty Ltd and Industrial Services Pty Ltd dated 2001 (the "Lease") for the following Premises:

9-39 MacKenzie Street, Melbourne (including Bell Place).

The above Premises have been purchased from Hualon Development Pty Ltd by the following respective entities:

Settlement of the purchase of the Premises occurred on Wednesday 19th January 2005.

The Lessor hereby gives Industrial Services Pty Ltd 3 months' written notice effective from the date of this notice to vacate the Premises in accordance with clause 3.2 of the Lease which states as follows:

In accordance with clause 3.3 of the lease, the Lease will be at an end 3 months from the date of this notice (20th April 2005) and Industrial Services Pty Ltd is required to vacate and deliver up the premises in accordance with Clause 11 of the Lease.

Please call the undersigned should you require any further information.

7 The evidence also disclosed that this letter was not a bolt from the blue, as representatives of the Drapac Property Group had previously made contact in December 2004 with Mr Abraham Platt, the principal of Industrial Services Pty Ltd foreshadowing the course which they were going to take.

8 It is the issue of that notice by way of the letter that has provoked the present proceeding in which Industrial seeks interlocutory injunctive relief restraining the respondent companies from acting upon the notice. Dr Croft SC and Dr Orow of Counsel represented Industrial and submitted that the following serious questions to be tried arose upon the evidence. First, they said that the letter of 20 January 2005 was ineffective in that it gave one day short of the required three days notice for it to be an effective notice under Clauses 3.2 and 3.3 of the lease. They referred to Section 61(a) of the Property Law Act 1958 and also contended that in the circumstances one was obliged not to count the first day of the period said to constitute the three months notice, that is, that they contended that the 20th of January for the purposes of calculating the three months notice should be excluded. They referred to Lewison, The Interpretation of Contracts (3rd ed) at paragraph [14.4] and Morton v Hampson [1962] VicRp 50; [1962] VR 364. The upshot of this argument is that according to Industrial, the notice to be a valid notice should have been expressed to expire on the 21st of April and not upon the 20th as was stipulated in the notice. The passage in Lewison relied upon at paragraph [14.04] is described as being the 'corresponding date rule. It states:

Where a contract provides for the performance of an act within a certain number of months the period expires on the day of the month bearing the same number as the date on which the period begins or if there is no such day on the last day of the month.

9 The learned author refers to the judgment of Templeman LJ as he then was as a member of the English Court of Appeal in Dodds v Walker [1980] 1 WLR 1061.

10 The rule postulated by Lewison proceeds from two bases. First, Section 61(a) of the Property Law Act 1958 which undoubtedly stipulates that in private deeds and contracts, in the absence of a contrary intention, the word 'month' means calendar month, not a so called lunar month of 28 days; secondly for the purpose of calculating a period from a particular event, the date upon which the event occurs is excluded from the calculation. Morton v Hampson which Dr Croft and Dr Orow referred to represents the application of that rule in the context of rules of court. Certainly all rules of court that I am familiar with have express provisions in the "Time" chapter to the effect of this proposition, namely that the first day of a period calculated from and forward from a particular event is excluded from calculation and the last day is included in the calculation. All interpretation of legislation statutes have provisions to the same effect.

11 The second question said by Dr Croft and Dr Orow to arise and to raise a serious question to be tried is their contention that in the circumstances in the context of the present lease, only the original lessor, namely Hualon Development Ltd, could give the notice and that the present respondents as assignees of the reversion were not competent to give such notice.

12 The third proposition said to give rise to a serious question to be tried is that upon the evidence it would appear, it is said, that the respondents have not made the decision required to render Clauses 3.2 and 3.3 operative. Dr Croft and Dr Orow said that objective evidence is required to indicate intent. Mere subjectivity is insufficient. They referred to the well known passages in the judgment of Mason J (as he then was) in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 352-3. Further, they submitted that a power such as the power contained in Clauses 3.2 and 3.3 of the lease must be exercised in good faith. They referred to Blackler v Felpure Pty Ltd (1999) BPR page 17,257 at paragraph 32 and Break Clauses, Self Interest and Notions of Good Faith (2000) 8 Australian Property Law Journal 175. They submitted that the evidence should lead to a conclusion or at least raise a serious question to be tried as to whether the respondents were going to demolish or redevelop the premises. As to the meaning of the word 'demolish' they referred to a decision of O'Bryan J in the Supreme Court of Victoria in Nelson v Healy [1948] VicLawRp 73; [1948] VLR 415, 417 and Betapave v Shell Company of Australia an unreported decision of the Supreme Court of the Northern Territory, Mildren J, delivered 12 October 2004 at paragraph 34. They said that 'redevelopment' means either the construction of a building or a change in the purpose of the use of land. They referred to an unreported decision of Abadee J as a member of the Supreme Court of New South Wales in Sydney Cove Development Authority v Chief Commissioner of Land Tax (Butterworths unreported cases 9504806) at paragraph [32]. His Honour's judgment was delivered on the 21st June 1995.

13 Finally, they noted that when their client tendered rental for a period past the 20th of April that cheque had been presented for payment and collected. They submitted that this action constituted a waiver of the operation of the notice and referred to a number of well known authorities as to waiver.

14 Dr Croft and Dr Orow submitted in the circumstances that the balance of convenience also favoured the grant of injunctive relief to their client. The affidavit evidence which they put in referred to the revenue derived by Industrial from its commercial car parking business, the employment of some six full time and part time individuals and the situation of the sub-tenant Oceanic.

15 Mr Greenberger on behalf of the respondents submitted that there was no serious issue to be tried. First, he directed my attention to a plethora of material, exhibited to the affidavit of Mr Wain on behalf of the respondents showing resolutions by the boards of each respondent to undertake a program of redevelopment having been carried in December 2004 and the retention of a number of consultants for that purpose; the preparation of a number of preliminary plans and finally the lodgement of applications for two lot plans of subdivision of each of the two allotments fronting MacKenzie Street. According to Mr Wain's affidavit the respondents wished to 'clear the decks' before taking any other action in a substantive way with respect to town planning permits. This was because the permit application process in the Central Business District was expensive and Mr Wain costed it at $100,000. From the date of issue of the permit a time limit of two years operates, therefore, he said, the Drapac Property Group did not desire to incur large sums of money and create deadlines for itself until the present matter of possession was resolved.

16 Mr Greenberger also invited me to conclude that no weight should be given to a brochure which was exhibited in the affidavit of Mr Platt filed on behalf of Industrial. That brochure referred to a number of the Drapac Property Group's projects, including the present premises and indicated that the existing building would be sold and that the open land in MacKenzie Street used for car parking would be retained for the moment.

17 Mr Greenberger said that the notice which had been given was valid. He said there was nothing in the lease which stated that the day of service of the notice should be excluded. He referred to a decision of the House of Lords in Mannai v Eagle Star Life Insurance Company Limited [1997] UKHL 19; [1997] AC 749 and the adoption of the approach taken by the majority of Lordships in that case in the Supreme Court of New South Wales in Gibbins Thompson Pty Ltd v Council of the City of Liverpool [2004] NSWSC 1172 and more pertinently by this State's Court of Appeal in MLW Technology v May [2005] VSCA 29.

18 Mr Greenberger took me in some length to the speeches made by the majority of Lords, namely Lord Steyn, Lord Hoffmann and Lord Clyde. In the Mannai case a tenant was entitled to give a so called break notice terminating his lease at the third anniversary. A notice was given which was otherwise appropriate, referred to the appropriate clause referred to the break operating at the third anniversary of the lease but nominated a date that was one day out. The majority of their Lordships concluded that the notice was valid. They said the principle which should guide a consideration of notices is to ask what the reasonable recipient of the notice would judge the notice to mean. Artificial invocations of ambiguity would not be effective to invalidate a notice if the reasonable recipient would understand the notice to have a purport which would make it effective. Lord Hoffmann in a lengthy speech referred to a number of old authorities in which that view had been taken and in more literary terms referred to Malapropisms as examples of where a meaning is clear despite the choice of a manifestly inaccurate word. Mrs Malaprop referred to an "allegory" in circumstances where it was quite clear that she meant an "alligator", hence one infers a notice which was intended to refer to alligators but referred to allegories would in the circumstances be treated as a valid notice on the basis that a reasonable recipient would realise that the notice was intended to deal with alligators not allegories.

19 Mr Greenberger said that the contention that only Hualon Development Company Pty Ltd to give the notice was without foundation. He said the relevant clauses, 3.2 and 3.3 clearly touched and concerned the land according to the test in that regard laid down by the Full Court of the Supreme Court of Victoria in Lang v Asemo [1989] VicRp 67; [1989] VR 773 and therefore the general rule laid down by Section 141 of the Property Law Act 1958 applied. That is, that his clients as assignees of the reversion were entitled to have the advantage of the covenants and exercise the lessor's powers under the lease in their own names.

20 As to the collection of the rental cheque, Mr Greenberger said that only rental to the 20th of April had been taken for the benefit of his client and the balance had been held in trust. Therefore he said, that there was no basis upon which it could be contended that there was any form of waiver so far as his clients recalled. Mr Greenberger then submitted as to the balance of convenience that any obstruction of his client's possession could inflict very large financial damage indeed. He referred to a special condition in the letter of offer with respect to each of the three loans. That special condition is as follows:

-

The loan is to be reduced by a minimum amount of $1,000,000.

- The borrower is to prove to the satisfaction of CFS that the underground fuel tank has been removed and that there is no remaining/residual ground contamination that exceeds accepted minimum levels.

- The asbestos identified in the property has been properly addressed/managed to the satisfaction of CFS.

21 Mr Wain's affidavit exhibits an asbestos report as to the action required with regard to those matters.

22 Mr Greenberger also directed my attention to material in Mr Wain's affidavit indicating that the Drapac Property Group was involved in a major redevelopment of 140 Bourke Street, Melbourne and that the financing for that project was cross-collateralised to this project. If this project were declared to be in default there would be a default and a potential very large loss to Drapac with respect to the 140 Bourke Street development. The clause in the loan agreements dealing with events of default renders any breach of conditions in the letter of offer, an event of default and other provisions authorise the lenders to proceed to enforcement upon the occurrence of an event of default.

23 Mr Greenberger noted that index searches carried out with respect to both Industrial and Mr Platt indicated that they had no real estate.

24 I should say at the outset that I reject the contention put by Dr Croft and Dr Orow that Clauses 3.2 and 3.3 cannot be resorted to by the respondents. Clause 1.2(e) of the lease contains the usual boilerplate provision to the effect that a reference to a party includes that party's assigns. Mr Greenberger is correct in saying that the test laid down in Lang v Asemo with respect to what covenants touched and concern the land has been met. This provision touches and concerns the land in the most fundamental of ways because it goes to the very right to possession of the land. Therefore, there is no serious question to be tried as to that matter. I should say that I also reject the submissions made by Dr Croft and Dr Orow in developing their contention that there is a serious question to be tried as to whether the necessary decision had been taken by the respondents that the only material which would be considered is purely objective material. They went on to contend that nothing short of obtaining a permit for a redevelopment would constitute such objective material. The authority upon which they relied, namely the Codelfa Construction case is a well known and relatively recent statement of the proposition that questions as to formation and construction of contracts must be judged objectively by reference to the words of the written contract and by reference also to the factual matrix existing at the time of contract formation. The subjective intentions of the parties are irrelevant. This is all trite law but contracts and provisions such as the one provided for at Clause 3.2 are very different indeed. A contract is something which represents the meeting of two minds and therefore the subjective intention of the one mind cannot control. It is objectively what both parties appear to be agreeing to and appear to be intending that is relevant. A decision such as the one we are called to consider under Clause 3.2 is unilateral and by its very nature subjective. Take an example of what I might describe as a landlord 'break' clause in a different context, say a residential tenancy where a lease provided that the term could be brought to a premature end if the landlord decided to demolish and rebuild his house. If a landlord could credibly prove a subjective intention to do that at the time he gave the relevant notice he would be entitled to a finding in his favour even if he had not obtained any permits, even if he had not even engaged an architect. It is possible for instance to make a perfectly credible decision to erect buildings on a piece of land without at the time having decided precisely which buildings will be erected.

25 I conclude nevertheless upon the evidence before me that there is a serious question to be tried as to whether the respondents have in truth made the necessary decision. Dr Croft and Dr Orow referred to the fact that in January of this year a sale sign appeared in front of one of the Latrobe Street properties offering it for sale or lease. They also referred to the Drapac Property Group brochure in relation to which I have already quoted Mr Greenberger's response. Both of those as it seems to me are inconsistent with the Drapac Property Group having the necessary intention that is an intent to demolish or even to redevelop. That view is consistent with the terms of the letters of loan offer and special conditions which immediately follow the special condition which I quoted earlier in the letter of offer provision is made for sales of part of the security property at the lenders approved valuation with the whole proceeds being applied to retire the loan pro tanto. Further, there is provision for a potentially on-going facility based upon the loan to valuation ratio of the MacKenzie Street properties. This seems to dovetail quite well with the brochure. Certain it is that Mr Greenberger has referred me to a wealth of action within the affidavit of Mr Wain with regard to plans, commissions and the like. All of those matters however are preliminary. The existence and persistence of a sign that is as vague as 'for sale or lease' would tend to give the lie to the thought that any decision has been made. As previously noted one can decide to redevelop without adopting a particular plan of redevelopment; but the offer of the property for sale may mean a simple sale without redevelopment.

26 Further, I accept the submissions made by Dr Croft and Dr Orow that the material produced by Mr Wain must be treated with some caution. Mr Wain's affidavit exhibits a lengthy letter of advice which the Drapac Property Group obtained from its solicitors in August 2004 as to the operation of Clauses 3.2 and 3.3 of the lease. That advice amongst other things, stressed the need for the existence of a written record to provide objective support for the alleged decision. It may be that skilful cross-examination at trial would give credence to the scepticism which Dr Croft and Dr Orow urged me to apply to this material.

27 I believe there is also a serious question to be tried as to the effectiveness of the notice. If I apply the constructional principle postulated by the House of Lords in the Mannai Investments Company case, and approved inter alia by a judgment of Gillard AJA in the Court of Appeal of the State of Victoria in MLW Technology and ask what would a reasonable recipient of this notice think it meant such recipient would be in no doubt that the notice intended to terminate the lease on 20 April. That date is noted as a date certain and elsewhere as my quotation demonstrates, the three months was said to run from the date of the letter itself, namely the 20th of January. The evidence disclosed that the letter was in fact served on the 21st of January. Clearly in my view, if the letter had said that the lease was to be terminated on a specified date, namely the date three months from the date of service of the notice it would be on this point a good notice. The rule postulated by Lewison that prima facie and in the absence of any contrary intention one excludes the day upon which an event from which a period was to be calculated, appears to be well established. No authority was put before me that would contradict that view. It is of the nature of such rules of construction that they are prayed in aid when the drafter of a deed does not make express provision for questions such as which dates would one count, which dates does one not count. For a rule such as this to apply there is no requirement that it should be expressly invoked in the deed itself. The rule seems to go back at least 200 years beginning with Lester v Garland (1808) 13 VCS 748 a judgment of Sir William Grant MR. It was accepted here in Victoria as early as Watson v Issell [1890] VicLawRp 123; (1890) 16 VLR 607, 610 per Higginbotham CJ.

28 I see no reason therefore why the rule stated by Lewison should not apply. On that basis it would appear that the notice is a day short. Mr Greenberger submitted however that in conformity with the principles of construction adopted in the Mannai Investment Company case it would be appropriate if one took that view to regard the notice as expiring on the 21st of April and not on the 20th of April. In my view there are a number of difficulties with that view. First, I do not believe that anything in the Mannai Investment case would lead to the view as to numbers of days limited for notices that a broad view could be taken so that six days would be good enough where a seven day notice was required, 29 days would be good enough where a 30 day notice was required. This I think is quite clear. Therefore, as a matter of logic there could be no basis for saying that Mannai somehow says that a notice of three months less one day is the equivalent of a three month notice. So far as the fall back construction urged by Mr Greenberger is concerned, there are difficulties with adopting that as well. The fall back position seems to come down to this; 'my view is that in calculating the three months I can count the day on which you get this notice; but if I am wrong about that, since I have made clear what clauses I am referring to in the lease, since you now I am in deadly earnest, you must construe my notice as having whatever is the appropriate expiry date to make it valid because you know I am serious'. I think the matter need only be put that way to indicate that it cannot be correct. A reasonable person reading this notice knows exactly what it means, it expires on the 20th of April. That certainly is what the respondents thought it meant. They kept and appropriated to themselves the rental up to the 20th of April and no further. Their primary submission before me was that this notice expired on the 20th of April and was valid on that basis. The Mannai Investment Co case I think is premised upon the view that there can be only one meaning that a reasonable recipient of the notice can attach to a notice for the principle to be invoked. The very nature of the respondents' submissions suggests that there can be two meanings. That to my mind takes this question outside the Mannai Investment principles. Moreover, the 'break' date in Mannai could be ascertained from the lease itself, namely its third anniversary. Here, the 'break' date was to be set by the notice.

29 In the result therefore I think the serious question to be tried on this issue is a relatively strong one so far as the applicant is concerned.

30 I turn then to the balance of convenience. Generally the balance of convenience in tenancy maters favours the status quo. It favours leaving a tenant undisturbed in possession because of the potentially remediable loss caused by wrongful removal of the tenant. Here the existence of a sub-tenant makes that view of things even stronger. There is however a very strong countervailing consideration in the present case and that is the existence of the special condition in the respondents' finance arrangements to which I have made reference earlier. However, I must also remind myself that whilst the existence of these arrangements is relevant it is also relevant to consider that they were self-imposed. That the present respondents agreed to these arrangements. These were arrangements that would put the respondents to the pin of their collar it would seem, if of the six months allowed for the completion of these tasks, some three months were necessarily taken up with gaining possession of the property. Since the evidence as to permits and the like has been very extensive I can conclude that no permit action has been taken with regard to the execution of these matters. Therefore, on any view there must have been a strong likelihood that the respondents could find themselves in default of this provision.

31 Secondly Dr Croft has told me that so far as the applicant is concerned it is willing to give as part of its undertaking an undertaking to allow everything that reasonably can be done by the respondents to satisfy this special condition.

32 Thirdly, whilst lenders as a matter of commercial experience are sometimes known to rely upon what some might regard as highly technical defaults, usually the reason that such reliance is made is because of some broader commercial intent. To put it another way, it seems likely that if the facilities which these respondents have are otherwise travelling okay it is unlikely given that their present difficulties would arise from the existence of an injunction, that these would be relied upon as a default. It is important I think to pay heed to the precise terms of the special condition. Dr Croft observed that the requirement is to 'address and manage' the asbestos not to remove it within the time limit which we are told expires on the 19th of July.

33 Mr Greenberger said that it was wrong to make light of what was involved in these works. He said for instance, the removal of the tank which Dr Croft said would be a relatively easy operation to complete, might leave substantial sub-surface pollution and the removal of that would not be an easy matter. On the other hand the potential complications of this task only goes to underline the point which I made earlier that even in the best of circumstances these special conditions were ones as to which there is a large risk of default.

34 Having said so much I believe that the balance of convenience favours the grant of injunctive relief. Certainly such injunctive relief should be conditional upon the additional undertaking with respect to the completion of these works which I made reference earlier and they should also be conditional upon the principal of Industrial, namely Mr Abraham Platt joining in the undertaking. Dr Croft at the hearing said that he would if necessary be willing to provide evidence of substantial assets held by both Industrial and Mr Platt to provide some security for credibility to be undertaken if necessary. I am not persuaded that that is strictly necessary, however if that evidence is available I believe it is in the interests of justice that he should give it. Therefore I indicate my willingness to grant the injunctive relief subject to the usual undertaking given by Industrial and its principal and subject to a further undertaking with regard to the addressing and managing of the asbestos issues in the relevant building and the facilitation of the removal of the tank referred to in the special conditions to the respondents' tenancy arrangements.