Liristis Holdings P/L v Wallville P/L [2001] NSWSC 958 | Case summary

RESOLUTION OF ISSUE 3 I will here deal with such other facts are bear upon the relevant issue earlier identified. 4 The Defendant fairly acknowledged that no point was to be taken for the purpose of these proceedings based upon Anshun estoppel, though leaving open that possibility in any final proceedings. 5 The significance of that is that the Defendant thereby put no argument to the effect that Anshun estoppel obtain by reason of the Plaintiff's not putting before Bryson J any contention based upon relief against forfeiture. In that respect, the conclusion reached by Bryson J in paragraph 29 of his judgment, quoted below, were strictly obiter. "29 It will be recalled that cl. 15 of the Lease makes it a condition of entitlement to a renewed lease that the lessee "… gives the lessor … notice in writing … to the effect that the lessee desires to have a further lease of the premises …" The plain and natural meaning of these words requires that the lessor receive the written notice within the time available. On the form of the sub-lease and particularly of cl. 15 it is in my opinion clear, as is usually clear in the case of renewals of leases, that it is incorrect to view the sub-lease as granting, at the time when the sub-lease was entered into, an interest in land during the renewal period, subject to fulfilment of a condition; it is only if the conditions including giving notice are fulfilled that the lessee has any interest relating to the renewal period and there is no room for any reasoning or for the application of any principles based on the view that non-compliance with notice provisions produces a forfeiture against which there is some room for equitable relief. The position rather is as the lease in that case was seen to be in Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Limited (1959) SR NSW 122; see 125." 6 It follows that the Plaintiff is not precluded by Anshun estoppel or res judicata from contending that relief against forfeiture was available, doing so in the present interlocutory context requiring no more than satisfaction of either a prima facie case or at least a serious question to be tried. I consider later the effect of any issue estoppel. 7 The Plaintiff with some care put an argument that deserves close consideration. The starting point is the judgment of Young J in Leads Plus Pty Ltd v Kowho Intercontinental Pty Ltd (2000) 10 BPR 18,085. Contrary to decisions such as Kim v Abbey Orchard Property Investments Pty Ltd (1981) NSW(ConvR) 55-039 Young J contemplated in interlocutory proceedings the possibility that relief against forfeiture might have been available in exceptional and carefully delineated circumstances, notwithstanding the absence of a lease or, indeed, the absence of any breach by the lessee, though concluding in the circumstances that the strict conditions for such relief were not made out. 8 I quote from the relevant passages in his judgment. "[19] However, in Australia (though not in England) in recent years courts have indicated that they may in some circumstances be prepared to go a little further with the second type of relief against forfeiture. Even if there is a condition which is essential not only in law but essential in equity, and even though equity would not grant specific performance because a time condition which is essential in equity had been breached, the court, notwithstanding, may still make an order for relief. However, it will do this only in exceptional circumstances: see particularly Legione v Hateley (1983) 152 CLR 406 at 449; 46 ALR 1. As Mason and Deane JJ say at that page: "Whether the exceptional circumstances exist in a given case hinges on the existence of unconscionable conduct. [20] There is great doubt that even if this principle does apply it can operate in a situation where what is forfeited is the equitable interest in property that exists under an option to renew a lease prior to the exercise of the option. There is discussion of this in the article by Professor A G Lang, "Forfeiture of Interests in Land", Law Quarterly Review, vol 100, 1984, p 427 at 449 and following. [21] The view that I have tentatively taken and which is, I think, reinforced by the judgment of Peter Murphy J in Hillier v Goodfellow (1988) Conv R 54-310, is that equity does have jurisdiction to make such an order but one must find that there is unconscionable conduct before one can exercise that discretion. [22] The cases on relief against forfeiture generally have been far more sympathetic to a plaintiff whose misfortune has come about as a result of "accident or surprise" rather than one that has come about through negligence. Indeed the view that was taken in the 19th century commencing with the attitude of Lord Eldon and which is still much in vogue in England today is, as Sir John Leach MR put it in Harris v Bryant (1827) 4 Russ 89 at 91; 38 ER 738 at 739: Ignorance is considered to be wilful, where a person neglects the means of information, which ordinary prudence would suggest; and accident is not unavoidable, which reasonable diligence might have prevented. [23] Whichever way one looks at it, in the instant case there was not pure accident or surprise. The tenant did not look at the lease until just before the last day the option could be exercised, and at the very least slack office procedures were the reason why the option was not exercised in time. These are matters involving failure to act with reasonable diligence or prudence rather than pure accident or surprise. [24] Apart from pure accident or surprise, the court only gives relief in this sort of case, even on the most benign view of the law towards a plaintiff, where there are exceptional circumstances which are connected with the existence of unconscionable conduct. The clearest case of unconscionable conduct is where the grantor of an option (the lessor) deliberately avoids the proper attempts of the lessee to exercise the option: see, for instance, Bragg v Alam [1981] 1 NSWLR 668. However, unconscionable conduct may take other forms. It is not necessary that the conduct involve some fault on the part of the landlord, though normally that will be the case. There will be some cases where it will be unconscionable for the landlord to take advantage of a small mistake on the part of a tenant to obtain a windfall. [25] As Mr Cashion SC points out, a number of subsidiary questions inevitably arise as guidelines as to whether the conduct was unconscionable viz (I will substitute the word "lessor" for "vendor" in the quotation I have adapted from Legione v Hately at 449 so that it makes sense in the current context): (1) Did the conduct of the lessor contribute to the lessee's breach? (2) Was the lessee's breach: (a) trivial or slight; and (b) inadvertent and not wilful? (3) What damage or other adverse consequences did the landlord suffer by reason of the lessee's breach? (4) What is the magnitude of the lessee's loss and the lessor's gain if the forfeiture is to stand? (5) Is specific performance with or without compensation an adequate safeguard for the lessor?" 9 That reasoning, which treats failure to comply with the conditions for exercising an option as a breach, stands in contrast to the reasoning in Kim v Abbey Orchard Property Investments Pty Ltd (supra) where Helsham CJ in Eq held that such proceedings were misconceived. "Under no circumstances can it be said that the benefit that is given to a lessee to exercise an option to renew a lease would, if not exercised, constitute a breach of an obligation of the lessee under the lease. There is no obligation upon a lessee to exercise an option for renewal; it is a right and benefit given to a lessee which he may or may not wish to take up; certainly if he fails to take it up, for whatever reason, then the failure in no circumstances as far as I can ascertain, would amount to a breach of an obligation placed upon a lessee under the terms of a lease." 10 Certainly that reasoning was the basis for the conclusion earlier cited of Bryson J at para 29 of his judgment, though it appears Young J's decision was not drawn to his attention. 11 In interlocutory proceedings of this kind it would not be appropriate for me to do other than to accept that there is a serious question to be tried to the effect that relief against forfeiture could be available, were the conditions for it made out. 12 The fundamental difficulty for the Plaintiff lies in the failure of the Plaintiff to demonstrate at the level of at least of a serious question to be tried, that the lessee's breach, in the words of Young J, was "trivial or slight" and "inadvertent and not wilful". There is no question of fault by the lessor. 13 The conclusion which Bryson J reached rejecting the lessee's evidence as to posting the notice of exercise (see 14 below) needs to be understood in the context of the evidence put by the lessee as to its posting. In summary, it was that on 24 May 2001 the lessee was told of the fact (in relation to earlier proceedings) that Barrett J's judgment would be delivered on 25 May 2001 concerning, inter alia, the possible forfeiture of the Plaintiff's lease for non-payment of rent. The evidence of the lessee's principal Mr Liristis, was that he was in court when the judgment was handed down granting that earlier relief. He then went to Counsel's chambers and later went back to his place of work where he prepared a notice of exercise of option witnessed by his wife and sister-in-law. The latter was then, according to Mr Liristis' evidence and that of the sister-in-law taken to Cronulla Post Office where it was posted at 3 pm on 25 May 2001. At para 20 Bryson J refers to a number of anomalies in the lessee's evidence including matters going to the plausibility of these events having occurred leading him to the conclusion below. 14 Thus at para 27 he concludes: "27 When I take into account matters which in my view make the lessee's case an improbable one and review the impressions arising from the evidence of the lessee's witnesses and their manner in giving it, their affirmations have not displaced the overall view that the lessee's case is very unlikely to be true. Although none of the anomalies and grounds for concern affecting the evidence in support of the lessee's case is conclusive, when they are taken together and the evidence is considered as a whole I do not have any confidence in the body of evidence . My finding, based on my view of the probabilities, is that the lessor has established that no notice in the form alleged by the lessee was sent to the lessor by post on 25 May 2001." [emphasis added] 15 That constitutes a finding on an ultimate matter of fact which I would consider indispensable to His Honour's judgment, so giving rise to issue estoppel on that ultimate and fundamental question of fact; see Spencer Bower, Turner and Handley "Res Judicata" (Butterworths, 1996) at 201-3 and authorities there cited. The further significance of this is that it leaves the posting of the notice of exercise of option to have taken place as late as three months after the last date for exercise of the option, namely 31 May 2001. The circumstances are set out in the evidence before Bryson J. While the posting that occurred finally on 3 September 2001 purported to be of a copy of the notice of exercise of option dated 25 May 2001, to suggest that it had earlier been posted would be quite incompatible with the findings of fact of Bryson J. This is insofar as it was intended to be suggested that this was simply a second posting of what had already been posted back on 25 May 2001. Clearly the "breach", or non-fulfilment of condition for exercise of the option, was therefore not trivial or slight. 16 For me to conclude notwithstanding that forfeiture were available on some lesser interlocutory standard would produce the unacceptable spectacle of inconsistent judgments. That in my case it be in an interlocutory context does not alter the binding effect of an issue estoppel. I could not conclude, in the face of Bryson J's findings, that the lessee's breach was both "trivial or slight" and "inadvertent but not wilful" even at the level of a serious question to be tried, remembering that the lessee bears the onus of establishing those matters. 17 It follows that despite the argument put meticulously by the lessee's Counsel, it must fail.

Liristis Holdings P/L v Wallville P/L

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