LEASES AND TENANCIES — Default and termination — Relief against
forfeiture — Relief for breaches other than payment
of rent – where
lease specified permitted uses of property – where permitted use was
Source
Original judgment source is linked above.
Catchwords
LEASES AND TENANCIES — Default and termination — Relief againstforfeiture — Relief for breaches other than paymentof rent – wherelease specified permitted uses of property – where permitted use wasdisputed – where relationshipbetween lessor and lessee broke down –HELD lease was validly terminated and relief against forfeiture should not begranted
Judgment (79 paragraphs)
[1]
The proceedings concern the termination of a commercial lease. The plaintiff, Musico Corporation Pty Limited ("MCPL") is the landlord. The first defendant, Master Truck Services Pty Limited ("MTS") is the tenant.
The lease has not been registered. Strictly speaking it is therefore ineffective at law. The case has, however, been conducted on the basis that it is enforceable as if it were a valid legal lease, under the rule in Walsh v Lonsdale[1882] UKLawRpCh 85; (1882) 21 Ch D 9.
The subject property is a block of land approximately 6600 m2 in size at Elizabeth Drive, Kemps Creek, on Sydney's western outskirts. The area was originally rural but some of the properties on Elizabeth Drive have been developed for light industrial and other commercial purposes. The land in question, however, retains a rural zoning. Before last year it was undeveloped apart from a small one-storey building on the south-eastern corner near the road.
The landlord company, MCPL, is controlled by Ms Immacolata (known as Emma) Musico, who is the sole director. In the management of the property, she is assisted by her son Giuseppe (Joe) Musico.
The tenant company, MTS, is, it seems, controlled by Mr Fatek Azeez. He, Mr Fahad Azeez and Mr Rakan Najeed Hirmiz Hirmiz, are guarantors of MTS' liabilities under the lease. They are the second, third and fourth defendants. They are commonly represented with MTS and, unless it is necessary to do so, I will not refer separately to them as parties.
As its name suggests, the business of MTS appears to be the provision of maintenance services to the trucking industry. MTS or an associated entity already operates a truck service centre at property near the Kemps Creek land.
Before the subject lease was granted, the land was leased by Muscio to Athena Truck Services Pty Limited ("ATS"). ATS is also a company associated with Mr Azeez. The lease commenced on 1 August last year. After a few months, following negotiations between the parties, that lease was replaced by the subject lease to MTS, which is in substantially the same form as the ATS lease.
The subject lease was dated 4 December last year. It consisted of a Real Property Act 1900 form of lease with an annexure containing a "commercial terms schedule", and a "commercial lease document" consisting of 30 clauses.
The commencement date of the subject lease was specified as 1 August last year, the same commencement date as the ATS lease. The term was four years, with a four year option. The initial rent was $152,000 plus GST per annum. The specified Permitted Use was tyre fitting.
Following negotiation of the ATS lease, Mr Azeez had a building erected on the Kemps Creek property for the purposes of his truck services business. It is a large shed-type structure. The shed features, at the southern end, a series of bays suitable for tyre fitting and other mechanical services. At the northern end is a truck washing facility which includes a large drainage pit connected to drainage pipes. In front of it is an extensive paved area giving access to Elizabeth Drive.
Work began on the shed during the ATS lease. There is some dispute in the affidavit evidence about whether the works were completed before the subject lease was granted. Council records referred to below suggest that work on the shed was still being completed as at 4 December last year, the date on which the subject lease was granted.
The shed appears to have been completed at the end of last year or early this year. On the top of it is a prominent sign which runs the length of the building frontage. In the middle the signage indicates "Master Truck Services". On the western side, above the bays which I have described, appears the word "tyres". On the eastern side, above the truck washing facility, are the words "truck wash".
Set out below are photographs taken on 14 May this year showing the building, as well as the pre-existing smaller building which has also been decorated with "Master Truck Services" signage.
The dispute which led to these proceedings appears to have been precipitated by action taken by the local authority, Penrith Council. No planning approval for the erection of the building or the use of the premises as a truck services facility was obtained. The Council issued a stop work order followed by an order requiring that the shed be demolished.
These regulatory actions became the subject of correspondence between solicitors for MCPL and solicitors for MTS. Through its solicitors, MCPL issued formal notices of breach of various terms of the lease. Further correspondence ensued, but evidently those managing MCPL's affairs considered the response unsatisfactory. A formal notice of termination was issued on 7 April this year. Possession was required by 14 April.
That deadline passed and MTS remained in occupation. The proceedings were commenced on an urgent basis by a statement of claim on 9 May.
In the statement of claim MCPL claimed a declaration that the lease had been validly termination on 7 April; an order for possession; damages in the form of mesne profits for trespass after that date; and damages for breach of contract. Those damages included the cost of demolition of the shed (later estimated in a quantity surveyor's report to be more than $10 million).
A cross-claim was filed for MTS and the guarantors. The basic allegation in the cross-claim was that the construction of the shed and the use of the premises as a truck wash had expressly or impliedly been authorised by representatives of MCPL. Relief was sought by way of estoppel or under the Australian Consumer Law (Competition and Consumer Act 2010 (Cth), Sch 2), the effect of which, if granted, would have been to prevent MCPL from terminating the lease on account of those matters.
By their defence, MTS and the guarantors disputed the validity of the notice of termination. Their allegation was that the breaches alleged in the notices of breach had not been established. Alternatively, relief was sought against forfeiture of MTS' leasehold interest. Strictly speaking, the application for relief against forfeiture is a distinct claim of relief, rather than merely a defence, and should have been advanced by way of cross-claim. No point, however, has been taken about this.
A few days after commencing the proceedings, MCPL obtained an interlocutory injunction from Hammerschlag CJ in Eq. The order relevantly provided:
[2]
On the usual undertaking of the plaintiff as to damages, the first defendant be restrained from:
(a) conducting or operating from the [Kemps Creek land] (Property) any commercial enterprise, including but not limited to a truck wash business and vehicle repair station of the kind described in the letter from Penrith City Council to the first defendant dated 20 March 2025 [set out at [67] below]; and
(b) causing polluted water, effluent waste, or pollutants to be discharged into the street stormwater system surrounding the Property or otherwise onto the Property itself;
until further order of the Court.
[3]
The demolition order was later revoked, at least for the moment. But, so far as the evidence goes, planning permission for MTS' business has not been obtained.
There is no dispute that, following the notice of termination, and indeed following orders made by Hammerschlag CJ, activities continued at the property. Numerous photographs in evidence (starting with the ones reproduced at [13] above) show the doors of the tyre fitting bays and the truck wash bay open, with trucks parked outside and workers apparently going about their business.
On MCPL's behalf it was contended that these activities contravened the orders made by Hammerschlag CJ and amounted to contempt. On 25 July, a notice of motion was filed for MCPL applying to have MTS dealt with for contempt. That application was resisted on the ground that, among others, that the activities did not involve conducting or operating "a commercial enterprise" for the purposes of order 1(a).
[4]
The proceedings were expedited. The trial was fixed to take place on 29 September. The contempt motion was also listed, on the footing that the Court would be asked to find MTS guilty of contempt with the question of penalty to be dealt with at a later stage.
In the course of opening, both the contempt application and MTS' cross-claim were abandoned. I made orders dismissing the contempt motion and the cross-claim, in each case reserving costs. I also decided to defer considering any questions of damages until I determined the validity of the notice of termination and, if the termination proved to be valid, the application for relief against forfeiture.
[5]
Initially, counsel for MCPL relied upon a failure to rectify alleged breaches of several different terms of the lease. But in final submissions counsel focused on the use of the premises.
Use of the premises was dealt with in cl 10 of the lease. That clause relevantly provided (emphasis added):
[6]
10.1 Permissible use
(1) The Tenant must not use, or permit to be used, the whole or any part of the Premises, for any purpose other than the Permitted Use [tyre fitting] without the prior written consent of the Landlord.
(2) The Tenant acknowledges that the Permitted Use is not exclusive to the Tenant and the landlord may, at any time, lease or licence any part of the Building to an entity which competes with the business of the Tenant at the Premises.
(3) The Tenant acknowledges and agrees that the Tenant must not use the whole or any part of the Premises for the purposes of truck mechanical services and for the purposes of clause 19.3 shall be considered an essential term of this Lease.
10.2 Conduct of business
(1) The Tenant must at all times keep the Premises open for trade as permitted by Law and at the very least in accordance with the usual industry trading hours pertaining to the Permitted Use.
(2) The Tenant must carry on its business and use of the Premises:
(a) in a proper, competent and professional manner;
(b) to the best of the Tenant's ability; and
(c) in accordance with best industry practices.
...
10.15 Statutory requirements
(1) The Tenant must:
[7]
(a) obtain and maintain all Approvals required for the carrying on of the Permitted Use;
(b) as soon as reasonably practicable after lodgement of any Approval under paragraph (1)(a), deliver copies of the application for the Approvals to the Landlord;
(c) do everything necessary to obtain the Approvals as soon as reasonably practicable; and
(d) produce a copy of the Approvals to the Landlord as soon as reasonably practicable after they are received by the Tenant.
[8]
(2) The failure of the Tenant to obtain any necessary Approval will not relieve the Tenant of its obligations under this lease (except to the extent that the carrying out of any obligation may not be lawfully done by reason of the absence of such Approval) .
(3) The Tenant must comply with any statutes, regulations, ordinances, by-laws, management statements or direction of an Authority so far as they may apply to the Premises or to the Permitted Use (except such of them as may require structural works or additions to the Premises).
10.16 No warranty as to use
The Landlord does not warrant that the Premises are now or will remain suitable or adequate for the Permitted Use.
[9]
It was common ground that no consent to the use of the property for truck washing (or for any other purpose apart from tyre fitting) had been obtained from MCPL for the purposes of the lease. Furthermore, no development consent for the carrying on of tyre fitting (or any other truck servicing activities) at the property had been obtained from Penrith Council.
As already mentioned, there is no dispute that use of the property, in the general sense of the word, continued after the notices of breach were issued, up to (and in fact beyond) the date of the termination notice. The order made by Hammerschlag CJ spoke of the conduct of a "commercial enterprise", but, on the face of it, the words of cl 10.1(1) were wider and the prohibition extended to any use apart from the Permitted Use.
Counsel submitted, however, that it did not follow that MTS had been in breach of its obligations at the time the termination notice issued (or is now in breach). Counsel submitted that cl 10.1(1) should be read as a prohibition which applied to "any commercial or business purpose" apart from the Permitted Use.
In support of this contention, counsel relied on the fact that cl 10.1 appeared in a set of terms which were described as "commercial lease" terms and that the Permitted Use was defined in a schedule defined as the "Commercial Terms Schedule". Counsel also pointed to cl 10.2(1). Counsel submitted, as I understood him, that in referring to use of the premises the parties must have had commercial, or business use in mind.
I asked counsel whether his argument effectively involved the implication of words into the lease, and, whether, if so, it was necessary for the putative implication to satisfy the conditions laid down in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283 for the implication of a term in a commercial contract. As I understood his response, counsel accepted that the answer was yes.
One of the BP Refinery conditions is that the putative term should be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it. In my view that is plainly not the case here. It would remain perfectly possible for MTS to exploit the property in the manner contemplated by the lease and operate a tyre fitting business on the property, having obtained the necessary planning permission to do so. An inability to use the premises for some other purpose which was not a "commercial or business" purpose might be an inconvenience to MTS, but it would be no more than that. In no sense would it render the lease unworkable.
It follows that the implication for which counsel for MTS contended cannot be made. MTS' defence fails for this reason alone. But even if one ignores the criteria required for implication, and treats the question as solely one of interpretation of cl 10.1(1), the same result follows.
In my view the language of clause 10.1(1) is clear. It prohibited the tenant from using the premises for any purpose other than that specified in the lease (or later agreed by the landlord). The width of the prohibition is emphasised by the express reference to use of any part of the premises as well as the whole. It is also emphasised by the reference to the tenant permitting such use as well as engaging in the use itself.
In its ordinary and natural meaning, "use" of land is a wide term which covers all types of activities on the land, whether carried out for commercial purposes or not. There is no warrant whatsoever for supposing that the parties intended that it would be open to the tenant to carry on any other activity at the premises so long as it did not do so for "commercial" or "business" purposes. No doubt there could have been questions about the extent to which some other activities, which, standing alone, would not have fallen within the Permitted Use, might have been permissible as part of, or ancillary to, that use, but such questions do not arise in the present case.
The considerations advanced by counsel do nothing to displace this view. It may be accepted that the lease described itself as a "commercial" lease. That was a commonplace expression, given that the property was commercial, as distinct from residential, in character. The Permitted Use was likewise commercial in nature. But it by no means follows that uses other than for that purpose were necessarily confined to "commercial" or "business" uses.
Clause 10.2(1) does not support counsel's argument either. The clause cast a positive obligation on the tenant to use the property for the Permitted Use. No doubt the explanation for this was that it was in the landlord's interest, in view of ultimately having to re-let the property, that reputable commercial activity should take place there. True it is, as counsel submitted, that this did not necessarily prevent other non-commercial activities taking place so long as they did not interfere with the conduct of the Permitted Use business. But it said nothing about whether, and the extent to which, such other uses would be permissible.
I should say that I am far from satisfied that, even if the words "commercial or business" were read into clause 10.1(1) as counsel contended, breach would not have been established. There are suggestions in the evidence that the presence of trucks and workmen at the property could be explained as some form of overflow from Mr Azeez's other truck service centre. There are also suggestions that the trucks belonged to entities associated with Mr Azeez, members of his family or acquaintances, although this was a matter which was very much placed in issue by counsel for MCPL. Overflow use in aid of another business and use for servicing commercial vehicles such as trucks, might well be characterised as "commercial", or at least "business" use, even if it could not be proved that money had changed hands.
But on the view that I have taken it is unnecessary to consider these issues further. I am satisfied that at the time the termination notice was issued, MTS was in breach of cl 10.1(1) of the lease. It follows that the notice of termination on 7 April was valid. MCPL is prima facie entitled to possession of the property and damages for trespass and breach of contract, subject to the application for relief against forfeiture to which I now turn.
[10]
For the purpose of this part of the case, it is necessary to say something more about the facts. I will then address the parties' submissions in the light of the evidence.
[11]
In the course of the initial negotiations for a lease for ATS in 2023, an "application to lease" form was signed by Mr Azeez. It required the applicants to "provide full details of usage and/or products to be sold from this site". The response given on the form was "Tyre fitting and replacement / selling tyres". The form contained a further section titled "Terms", with another form field requiring that the applicants describe "Usage". The response in that field was "Tyre fitting and replacement".
By October 2023 the parties had negotiated a lease, and draft heads of agreement were sent by Mr Vincent Stevens, an estate agent acting for MCPL, to Trump Lawyers, a law firm acting for ATS. The document included a section titled "Terms and Conditions". One of the terms was listed as "Usage: Tyre fitting".
It seems that the heads of agreement may not have been signed, but the parties nevertheless proceeded with the deal. Nine months later, on 10 July 2024, a formal lease was executed between MCPL and ATS. As already noted, the lease commenced on 1 August 2024. It was later replaced by a lease to MTS, which was executed on 4 December 2024, and covered a larger area of land at a higher rent. The remaining terms of the MTS lease, however, appear to have been the same as those in the ATS lease.
Work on the shed appears to have begun soon after the lease to ATS commenced. Mr Azeez retained Mr Aram Odesh, an architect, to undertake the design work.
The plans initially drawn up by Mr Odesh and submitted to Ms Musico for her approval indicated that the shed was to be used for truck washing. On 27 August, she sent an email to Mr Stevens, writing:
[12]
As you know, I am really not ok with the tenants starting works on the property without the proper approvals from me, let alone having the approval documents from the certifier. I would like you to tell the tenants that all works must stop until this is sorted.
As we discussed on the phone, they have changed the intended use of the land from what they first told us and it's through no fault of ours that it will be delayed. We recognise that they don't want to delay their project, however it isn't approved.
[13]
Mr Azeez then commissioned a new set of plans. On 31 August, he was sent an email by Mr Odesh with the adjusted plans attached. The email from Mr Odesh stated:
[14]
Please see the attached plans as requested. I have removed any reference of tyre, truck, or wash areas. I have also removed the swept path diagram so there is no reference for a truck wash or tyre change, it's only proposed agricultural shed for a farm use.
[15]
Despite her reservations about the work having been commenced, Ms Musico provided an approval on MCPL's behalf, dated 1 September. The approval stated:
[16]
As owner of the above-mentioned property, I consent to Fatek Azeez (Authorised Person) to:
(a) Prepare and lodge an application with any authority to construct a farm shed (agricultural shed and tyre change) for agricultural use.
(b) The Authorised Person shall pay for all costs, fees, fines, and damages arising out of the application under this authority and indemnifies the owner in relation to such costs, fees, fines and damages.
[17]
Ms Musico nevertheless remained concerned about the lack of approval for the construction works. On her instructions, Mr Stevens sent the following email to Mr Azeez on 2 October:
[18]
No construction is to be undertaken on the premises until the certifier approves the plans for commencement of construction.
We will not be giving approval for any applications until we have sighted and approved the plans which include an acceptable solution for the disbursement of all wastewater.
[19]
Despite this email, construction work on the shed, including the truck washing bays, appears to have continued.
The works came to the attention of the Penrith City Council. On 5 December 2024, the Council issued an "Emergency Development Control Order", requiring MTS to "immediately" "cease all construction works at the premises". The order stated that the Council had conducted investigations which revealed that "works had commenced in contravention of the [Environmental Planning and Assessment] Act".
In the Order, the Council included a section headed "Reasons for Emergency Order", which contained:
[20]
A. Construction works in the form of a large steel framed structure requires development consent under the Penrith Local Environmental Plan 2010. No development consent has been obtained. ...
B. A search of council records indicates no development consent has been obtained prior to the construction works being undertaken.
C. It is unknown if the large steel structure is structurally sound as no critical stage inspections have been undertaken.
D. The work is being carried out without approval and as such does not represent orderly development.
[21]
Work on the shed appears to have been completed by the end of December 2024, and the facilities began to be used.
On 7 February 2025, the Council issued a further Development Control Order, which required MTS to:
[22]
a. Cease using the premises as a commercial premises, including but not limited to, a truck wash facility and vehicle repair station; and
b. Cease using the building located at the front of the premises, identified with signage as 'Master Truck Service' for a commercial use.
[23]
On 12 February, two Council officers, Lisa Hughes and Chris Manuel, attended the property to undertake an inspection. They spoke to the manager on site, and inspected the premises in detail, including the truck wash bays and the waste disposal systems. Later that day, Mr Manuel issued a "Direction to take preventative action" on behalf of the Council.
The prevention notice stated:
[24]
Upon inspection it was found that polluted water from the truck wash was piped to an oil water separator behind the unauthorised shed. The polluted water is then piped to a sump and then pumped to the street. The release of polluted water to the street is an offence under the Protection of the Environment Operations Act 1997.
This notice is issued to you, Master Truck Service Pty Ltd, as the operator of Master Truck Service. You have not taken suitable measures to prevent polluted water entering the stormwater system and in doing so are allowing the release of polluted water in an environmentally unsatisfactory manner as defined in the Protection of the Environment Operations Act 1997 ...
[25]
On 13 February, Mr Azeez called Mr Manuel to discuss the property. A file note of the conversation made by Mr Manuel is in evidence. It records:
[26]
- Fatek advised he had received the Prevention Notice which I had emailed him earlier in the day. He advised he had spoken to a plumber who was available and willing to do the works requested and provide the plans of where the stormwater pipes were installed and how they have been connected / where they are being discharged.
- Fatek advised he will have the documents submitted and once that is submitted then is he free to continue operating. I reminded Fatek of the Order which has been issued to Master Truck Service which needs to be complied with. The terms state the business must cease operating by 5pm Monday 17th February 2025. Fatek did not take this comment kindly and said he was submitting a DA and once the DA has been submitted then he will continue to operate until the DA has been determined. I advised Fatek this is incorrect and if he is to continue to operate then further regulatory action will be taken in the form of penalty notices or even court prosecutions.
- Fatek became agitated in my response and kept saying "now listen to me Chris" and would attempt to explain he is doing his best to comply with the terms of the Order and how he will not cease using the business. I advised Fatek I am happy to listen to him but he also needs to listen to what I am explaining regarding the premises. I repeated myself and said it is council's opinion that the use of the premises as a truck wash facility is prohibited so he will need to cease operations by Monday at 5pm.
- The conversation continued with Fatek telling me he is trying to do the right thing and work with Council. I said to Fatek if this is the case then he will need to cease operating as per the terms of the Order.
- Fatek again advised he will be submitting a DA for the premises with the help of his planner. I advised Fatek he may want to explain to his planner the concerns council has with the permissibility of the premises and ensure this is explained during the application process.
- I advised Fatek he will need to comply with the Prevention Notice and Council will monitor the site to ensure the potential pollution incidents have been rectified to avoid any further regulatory action.
[27]
On 17 February, a development application ("DA") was submitted on behalf of MTS for approval of the shed which had been constructed. It was apparently submitted by Mr Odesh's firm. The application however sought approval for a "proposed shed", when the shed had already been constructed. On this ground the Council declined to entertain the application, and it was returned without approval the following day.
On 3 March, Mr Manuel had a conversation over the phone with Mr Azeez, which he recorded in a file note the following day. According to the file note, following a reference to the Prevention Notice, the conversation turned to the lack of approval for MTS' activities at the premises:
[28]
- ... I asked Fatek was the business still operating, Fatek advised the business was still operating. I reminded Fatek a Development Control Order had been issued and the business was required to cease operating. Fatek replied "I will not stop operating". I advised Fatek council will be taking further regulatory action regarding this.
- I advised Fatek the plans he had submitted were of a proposed agricultural use not what was currently installed at the premises, the terms of the order clearly stated council requires plans of what is currently installed at the premises.
- Fatek advised he has a waste truck turn up daily to dispose of the waste of the premises. I advised Fatek this information has not been submitted to Council and I was unaware of this occurring. Further discussions with Lisa Hughes advised that Fatek had stopped washing trucks as it was costing him too much money to pump the water out.
- Fatek began to explain he was able to continue to operate the business as he was "washing agricultural trucks" as he has a produce company. I attempted to explain to Fatek this information is extremely incorrect and the use is prohibited at the premises. Fatek continued to dismiss any of my comments or advice and then asked for favours in regard to gaining compliance at the premises. I advised Fatek I had been open and honest with him from the beginning of the investigation, I allowed an in person meeting to occur where he gave incorrect information, I reminded him of the outstanding order and response to the prevention notice I have also provided information to advise him that the information he is being told is incorrect, all of which he has not adhered or listened to. I advised Fatek council does not allow favours and my main priority is to achieve compliance at the premises.
[29]
Meanwhile, on 28 February, MCPL's solicitors had served a notice of breach of covenant on MTS via an email to Trump Lawyers. This included allegations that MTS was in breach by:
[30]
a. failing to obtain planning approvals with respect to the construction and use of the Premises for the Permitted Use;
b. using or permitting to be used the Premises as a truck wash being a purpose other then the Permitted use and not consented to by the Lessor;
...
[31]
Item "b" above was allegedly a breach of cl 10.1, which I have already set out above at [27], and "a" was allegedly in breach of cl 12.2, which reads:
[32]
12.2 Procedures to be followed
The following procedure and conditions apply in the case of any alterations, additions or improvements proposed by the Tenant to the Premises unless waived by the Landlord:
(1) The Tenant must submit detailed drawings and other specifications of the Tenant's Works (specifications) to the Landlord in order to allow it to make a determination as to whether to grant its consent to those alterations.
(2) The Landlord, acting reasonably may request the Tenant to alter the specification. The Tenant must comply with any such request.
(3) If the consent of any Authority is required for the Tenant's Works, as approved by the Landlord, then such consent must be obtained by the Tenant at its cost before any work is commenced. The Landlord must sign or endorse its consent as owner of the Land on any application for such consent.
...
[33]
The breach notice required MTS to stop using the premises immediately, remove all signage on the premises referring to "Truck Wash", deliver a copy of the DA which had been submitted on 17 February 2025, provide evidence of compliance with Council directions, and obtain requisite approvals to conduct the Permitted Use of the premises.
On 4 March, Trump Lawyers replied to the notice of breach. Alleged breaches "a" and "b" were denied. The letter stated:
[34]
In respect of the use of the premises, we are instructed by our client that the lessor has authorised the lessee to use the premises for agricultural use and tyre change and that that having a washing bay on the premises to wash trucks and agricultural machinery falls within the meaning of agricultural use.
In relation to [the DA], the application was returned by council on the basis that further information is needed in order to determine the application. The lessee has now engaged a town planner, Mr Mark Pepping, and an architect, Mr Aram Odesh, to attend to the lodgement of the complete development application once again. It is anticipated that he complete DA application will be re-lodged within 7 days from the date of this letter. The lessee intents to provide a copy of the complete application to the lessor at the same time it is lodged with the local authority.
[35]
By this time, as noted in Trump Lawyers' letter, MTS had retained the services of Mr Pepping. He concluded that it was necessary to submit both a new DA to obtain authorisation for the intended use of the premises and an application for a Building Information Certificate (BIC) to regularise the construction of the shed.
Mr Pepping is said to have submitted a new DA on 4 March, but it is not in evidence. In support of the application for a BIC, Mr Pepping wrote to the Council on 12 March:
[36]
This letter serves as the cover letter explaining the need and use of the shed.
...
The shed is currently being used to operate a Truck Wash.
...
Based on the existing RU4 Primary Production Small Lots Zoning and the additional permitted uses listed under Schedule 1 of Penrith LEP 2010, none of the permitted uses include a truck depot and therefore the current use is deemed a prohibited use.
...
The lessee and owner of the shed, Mr Azeez, is intent on cooperating with Penrith City Council in pursuing a use of the shed that is consistent with a permissible use of the land as per Council LEP 2010.
To this end, Mr Azeez will be seeking to lodge a Development Application to seek Council development consent to operate a Rural supplies from the premises.
[37]
On 17 March, Mr Manuel and Ms Hughes again attended the property with other Council officials. Mr Manuel's file note dated 18 March 2025 records that, following the inspection:
[38]
- As everyone dispersed Fatek asked could he have a quick chat with me on my own, I advised yes this was fine. Fatek began to explain the issues he has had with submitting DA's, BIC's etc through the portal and to Penrith Council. He advised the DA was returned and after I advised a BIC application was to be submitted he has now been informed to withdraw the application from a [Council officer] called Sarah. ... I ... advised the plans submitted with the DA had "proposed agricultural shed" which is incorrect. The structure is already here so that cannot be accepted. He then asked why he was told to withdraw the BIC. I advised Fatek that Sarah was doing him a favour and saving him a lodgement fee of around $6,000 ... as what he has stated on the application is incorrect and it would also not be able to be approved as the use is prohibited.
- Fatek continued to say he is trying to work with Council and has engaged consultants to help with the lodgement of a DA and BIC and any other relevant documents to obtain approval. Fatek asked council to work with him and provide time extensions as the previous request for an extension has been denied.
- I explained to Fatek he cannot expect council to be offering him any further leniency or favours as there is an outstanding Order which has requested him to cease operating. I told Fatek when we arrived at the premises today a truck was being washed, this was required to cease over 3 weeks ago. I asked Fatek was he planning to comply with the terms of the Order and cease operating he replied "No I will not cease operating." I advised Fatek this is not helping and explains why Council will not be showing further leniency after we have already agreed to in person meetings at the civic centre, provided planning advice as to the permissibility of the site and he has also attempted to obtain planning approval through CDC and has been refused each time, yet he still remains operating.
- During our conversation Fatek became agitated and was not willing to accept any responsibility. He stated it is not fair that council has not allowed time extensions. He also mentioned it is not enough time for him to engage plumbers "at the drop of a hat and be here in 2hrs" referring to the notice council issued. I advised Fatek he may think the timeframes are not adequate but these time frames have been put in place due him not obtaining the correct planning approval prior to constructing/ operating at the site. Fatek would still not accept any responsibility and continued to blame council for being unreasonable. I advised we will have to agree to disagree as its quite clear why we are in this situation and that is because he is operating without any approval. At this point of the conversation Lisa came over .... Lisa asked could she make comment to which Fatek said yes. Lisa attempted to relay the information I had just explained to Fatek, but Fatek was not all that happy to hear it again so the conversation ceased.
...
- I proceeded to walk to the front of the wash bay where Fatek was having a conversation with Paul, Lisa and Spencer. During this conversation Lisa explained the issues which need to be rectified.
- Lisa also asked Fatek was he going to comply with the Order issued by Council to cease operating, he responded "No". ... [He said] he cannot cease operating as the workers at the site need to be paid to support their children and families, and stated Council would be responsible if this was to occur. Lisa immediately said something along the lines of "for god's sake Fatek this is all your doing and the reason we are here is because you didn't get the required approvals". Paul also stated "cmon Fatek do not try and guilt trip us by saying our actions will cause these families to suffer". Paul ensured Fatek was made aware Council was here to do a job, protect the environment and ensure the site was compliant. Any other issues regarding people getting paid was entirely Fatek's responsibility.
...
- We thanked Fatek for allowing us to access the premises and we left the site. ...
- It is to be noted that when we arrived at the premises there was a truck being washed. Also as we were having a debrief after the inspection it was noted further trucks were being washed/cleaned in the wash bay with Paul even making comment of how much spray was leaving the bay whilst the washing was being undertaken.
[39]
On 20 March, a solicitor acting for the Council sent an email to MTS which stated:
[40]
To date, Council's inspections have revealed that, despite a legal obligation to do so, Master Truck has failed to comply with the terms of the [Development Control Order].
As a result, Master Truck is in clear breach of the DCO and section 9.37 of the Environmental Planning and Assessment Act 1979 (EPA Act)
Council is now preparing to commence Class 4 proceedings in the Land and Environment Court of New South Wales to restrain the breach of the EPA Act.
[41]
On 27 March, MCPL's solicitors served a second Notice of Breach on Trump Lawyers. The alleged breaches included:
[42]
a. The Lessee continues to trade from the Premises notwithstanding that it has not obtained the requisite approvals required to carry on the permitted use pursuant to the Lease;
b. A shed has been erected without the requisite approvals;
c. The Lessee continues to use the shed notwithstanding it has not obtained the requisite approvals for its continued use and existence;
d. The Lessee has not obtained an Environment Protection Licence as indicated to be required in the Advisory letter;
e. The Lessee is damaging the reversion by permitting contaminates to escape in the course of washing trucks;
f. Notwithstanding a previous Section 129 notice the Lessee continues to conduct the business of a Truck Wash without approval and operate a business which is not permitted by the Lease.
[43]
The Lessor does not consider there is any way in which the Lessee could within a reasonable time remedy the breaches identified above, and that the conduct of the Lessee evidences it has for all intents and purposes acted in manner so inconsistent as to demonstrate an intention not to be bound by the lease and has thereby repudiated it.
However, without waiver of any of its rights, to the extent the Lessee says the Lessor is able to remedy the breaches, the Lessee is invited to provide any written response (and to the extent it can, providing evidence that has remedied the breaches) by no later than 4:00pm, Tuesday 01 April 2025. Owing to the nature of the breach specified above the Lessor considers this to constitute reasonable time in all circumstances.
[44]
On 1 April, Trump Lawyers responded to the Notice, stating:
[45]
Our client has ceased operating any truck wash activity from the premises.
...
As to the shed, the lessee is not using this for commercial purposes, but for storage.
...
We acknowledge that the initial development application (DA) lodged by our client was returned by Penrith City Council requesting further information. Our client has since engaged a town planner and architect, and is in the process of re-lodging a revised application which will regularise all works and confirm the lawful use of the premises.
...
Our client believes it is presently compliant with its obligations under the lease, or where breaches may have occurred, has taken appropriate and timely steps to remedy them. In particular:
Truck wash operations have ceased;
With regards to the tyres, environmental compliance measures have been undertaken and all tyres have been removed from the premises;
A development application is being re-lodged;
No further unauthorised construction is occurring;
[46]
That same day, the Council sent a "Notice of Intention to Serve a Development Control Order" to MTS, indicating that the Council was intending to issue a development control order requiring the demolition of the shed.
On 2 April, an application for a BIC and a DA were formally submitted to the Council by Mr Pepping. It is unclear on the evidence before the Court whether these were the same applications referred to at [65] above, and were only submitted after a delay, or whether they were fresh applications.
As already noted, on 7 April MCPL's solicitors served the Notice of Termination on MTS.
On 23 April, the BIC application and the DA were formally accepted by the Council for lodgement. Thereafter, they proceeded to the assessment stage. But, on 21 May, Hannah Vousden, a development assessment planner for the Council, emailed Mr Pepping, stating:
[47]
A preliminary review of your application has been carried out. However, the application has not been accompanied by a valid owner's consent in accordance with Clause 23 of the Environmental Planning and Assessment Regulation 2021 . The written owner's consent provided, dated 13 Mar 2025, is not consistent with the nature of the proposal detailed in this development application. Therefore, Council is not satisfied that the owner's consent provided for the development application satisfies the requirements of the Environmental Planning and Assessment Act 1979 and Environmental Planning and Assessment Regulations 2021. In addition, the development application has attracted a submission which indicates that the required land owner's consent will not be forthcoming.
Therefore, in the absence of land owner's consent to lodge this development application, it is requested that you withdraw this application ...
[48]
A file note of Sarah Hall, a senior development compliance officer for the Council, dated 29 May, recorded:
[49]
BIC is unlikely to be supported due to no lawful use being established. A DA is currently under assessment, should the DA be determined the BIC will be determined by way of refusal due non compliances with the LEP [Local Environment Plan], DCP [Development Control Plan] and BCA [Building Code of Australia].
[50]
On 18 June 2025, Ms Vousden sent an email to Mr Pepping in which she stated:
[51]
An assessment of the application has been undertaken, including a site inspection on 5 June 2025 and I wish to advise that the application is unable to be supported. It is considered that the application has not provided sufficient information to demonstrate that the proposed operations at the site satisfy the definition of 'Rural Supplies' or that the site is suitable for the proposed use. Due to the nature and extent of matters outstanding it is recommended that the application be withdrawn ... If the application is not withdrawn within this timeframe, it will be determined, with the recommendation being for refusal.
[52]
There is no evidence about the further progress of the DA (or the application for a BIC). Presumably those applications were withdrawn or refused. Meanwhile, on 14 May, the Council had served a further Development Control Order requiring the demolition of the shed.
On 21 May, Ms Hughes wrote to MTS to indicate that the Prevention Notice had been complied with, that no further action was required under it, and that that matter would be closed. The Development Control Order requiring demolition of the shed was later revoked, but communications from the solicitors for MCPL indicate that this "revocation" was effectively a stay pending the outcome of the present proceedings. There is no evidence as to the status of the other Development Control Orders, or about whether any further action has been taken by the Council in pursuing the foreshadowed Class 4 proceedings.
[53]
In his affidavit evidence, Mr Azeez claimed that from the outset he had disclosed to the Musicos that he wished to operate a truck wash on the subject land. He deposed that he had an understanding was that it was only a matter of time before the rural zoning would be changed, and that when that occurred the Permitted Use under the lease would be changed so as to include truck washing as well as tyre fitting.
Mr Azeez also deposed that the Musicos were aware of the work on construction of the shed being undertaken and made no complaint. Indeed, he claimed that Mr Musico gave him a go-ahead and suggested that it was better not to obtain approval in advance, but rather to obtain a BIC after the works had been done. Mr Azeez further claimed that Mr Musico took a close interest in the works, and agreed, on MCPL's behalf, to pay for some of them.
Mr Azeez deposed that the Musicos only expressed concern about the works and the lack of approval after the Council took action. His understanding was that the breach notices were only issued on MCPL's behalf to placate the Council and did not have to be complied with. He claimed that he was shocked when the formal Notice of Termination was issued.
Affidavits were filed on behalf of MCPL from Ms Musico, Mr Musico, and Mr Stevens, which flatly denied Mr Azeez's allegations. According to those affidavits, what actually happened was that Mr Azeez planned to get approval for a rural shed, and then to operate the tyre fitting business under a "rural enterprise" approval. Both Mr Musico and Mr Stevens deposed that Mr Azeez expressly agreed that he would be responsible for obtaining all of the necessary consents to operate any business which he wished to operate.
In cross-examination counsel for MCPL asked Mr Azeez about the Permitted Use specification which appeared in the lease application and the heads of agreement:
[54]
Q. From the very outset, it was your position or your representation to the plaintiffs that what you were going to use the site for was tyre fitting and replacement selling tyres. That's correct?
A. Yes.
Q. It's never going to be used for a truck wash.
A. Yes.
Q. It wasn't going to be used for mechanical repairs to trucks. It's just tyre fitting.
A. No. We had an initial agreement with the owners that it would be used for truck washing. And they agreed to that on the meeting that we conducted on site.
[55]
Mr Azeez also emphasised that he did not have a full understanding of the documentation he was signing, and stated that he relied on discussions with Mr Stevens and his lawyers:
[56]
Q. Then you see underneath usage, it says use by the lease, "Please note, it is the lessee's responsibility to satisfy themselves regarding any aspect of the suitability, usage, hours of operation, et cetera, for the occupation of the premises." You see that?
A. Yeah.
Q. You understood that to mean that it was up to you to satisfy yourself that the premises was able to be used for that purpose?
A. Yes. But at the time of when I signed this document, like, I didn't really have a clear vision of, like, reading all of it, like, you are just reading it now. Like, I was -
...
Q. Please finish your answer, Mr Azeez.
A. Yeah. I'm saying at the time when Mr Stevens called me about this and I filled out the application, like, that was my first time filling an application for an agent. And secondly, all I had to look at, and I'm being honest, is that about the year term and the use, and when would it start. Nothing else. Like, all these points that you just mentioned, like, I swear to God, I didn't even - I'm just seeing them now. Like, I've never known these points before.
...
... you see that this heads of agreement, it's addressed to Trump Lawyers. They were your lawyers at the time. Were they not?
A. Yes.
Q. I assume that they walked you through this agreement. You sat down with them before this agreement was agreed to.
A. Yes.
Q. They explained it to you.
A. They explained, but it wasn't, like, everything explained in dot points. Like, all I had to do was sit with the solicitor and he had the yellow papers mentioned on the lease. And all he had to do was go through these yellow papers that was on the - marked on the - on the booklet, and just run through these, and that's it. Like, we didn't - I didn't really, like, have - read through every single point to - to have a clear vision of - of everything before signing.
...
Q. They [the Musicos] had never authorised you to use the premises for washing trucks.
A. They did. My whole purpose of entering into the new lease for Master Truck and the extra land was for truck washing.
Q. But what I'm suggesting to you is that this construction, that washing trucks and agricultural machinery falls within the meaning of agricultural use, is that something you came up with?
A. No. That was their idea.
Q. Who's they?
A. I think Trump's, the - my solicitor, Joseph.
Q. That's something that the solicitor came up with and you just went along with that?
A. Yes.
[57]
Mr Azeez maintained that, despite the documents not showing anything of the kind, there were extra-contractual agreements that a truck wash would be permitted, informally from the outset and then formally later:
[58]
Q. ... that was the approval that you received; that's correct?
A. Yes.
Q. And there's nothing in here about a truck wash. You would accept that?
A. Yes.
Q. So you accept that the approval didn't say anything about a truck wash?
A. Approval on papers didn't say, but on the initial agreement the - the owners have told me that they will allow me to do truck washing until I can get it approved.
Q. You see, what I'm suggesting to you is, not only did the approval not have anything about the truck wash, the original plans did describe a truck wash, but the [Musicos] specifically rejected that, didn't they?
A. Yes. They rejected to that, because they said, "Once you can do it non-commercially for now until - until you can get it approved, and then send us these plans. We will sign off on them, because we - we - we don't think that you will get It approved under truck washing for commercial use."
Q. So you go to court book 3 page 192. And do you remember that email from your architect Odesh to yourself, and he says, "Please see the attached plans as requested. And as requested, I have removed any reference to tyre, truck or wash areas." Yes?
A. I think so.
Q. And that's reflective of the fact the plaintiffs specifically didn't want you to do that. That's true, isn't it?
A. No, it's not true.
Q. Because you didn't have any approval to do that; that's correct?
A. I didn't have any approval. They promised me that they will get the BIC done after I get the building - the shed done, and I had an agreement with them face-to-face. I - I personally, I'm not involved in emails and reading and sending and, like, getting - and Court matters like this used to go through what have been written. I - what I know from my experience and back then in my country, is that whenever I speak face-to-face to somebody, that's when I will get my word from them. It's not on - on writing and on signatures and on booklets. Like, that's what I have learnt from - from my generation and from back then in my country. I wasn't, like - I'm not used to this.
...
Q. You didn't complain, is what I'm asking you to comment on, when you received the request from the plaintiffs to remove any reference to a truck wash from the plans. You didn't say, "Hey, what are you talking about? We had an agreement," did you?
A. Well, we had - we had every time meetings on site with the owners, and I was on the phone with the - with the - with the agent sometimes. And, like, most of the time was face-to-face. Like, I didn't concentrate on sending emails, and I'm not that free to send emails. Like, I was studying, and I am still studying, and I'm doing work for myself. Like, it's--
Q. Well, what I'm suggesting to you is that that's not true, and that there was never any consent or agreement orally or otherwise from anyone from the plaintiff or their agents to permit you to operate a truck wash from the premises. That's true, isn't it?
A. No.
...
Q. You've nominated the use that you're going to put the property to and I'm just asking you to accept that it was tyre fitting as per the terms of the lease.
A. Yes. It was, but subject to them telling me that - sorry can I talk now?
Q. You can answer, yes. Of course.
A. So - okay. So they - they said to me, okay, that there's - so that property, it's in the middle of 10 commercial places. Like, firstly, two petrol stations, one butchery, tobacconist, coffee shop, architects and so on. They said to me that enter into this lease my - my whole - my whole idea was to get the tyre fitting. Okay. And then when I questioned them about the truck washing, they said to me, yes, you can do it but for non-commercially until the land will get rezoned or you can get it approved on the council because all the surrounding areas are commercial. And they do have - most of these areas themselves that they own them that they are commercial. And they have been for a very long term commercially operating until now.
[59]
Mr Azeez also claimed that he had difficulty understanding contractual principles due to language and cultural barriers:
[60]
Q. ... you don't say in your affidavits that, "I told my lawyers about these conversations, but they said, 'Don't worry. Just sign it.'" You don't say that in your affidavit.
A. Like, I - my - the Trump Lawyers are from my area, and - and back then in Iraq. Like, we speak our language. Like, our conversation, me and him, and to go through all that lease, like, wasn't on the detail that you are just saying now, and the dot points that you are raising now. Like, it wasn't really to that point that he was mentioning every single point that I had to agree or not agree on, or that I can change it. It wasn't that.
HIS HONOUR
Q. Which language was the conversation in?
A. In Assyrian. Assyrian.
O'CONNOR: Okay.
Q. But nevertheless, your evidence now is that you actually did tell your lawyers that there was this agreement?
A. No. Like, I tried. But I don't recall 100% what was a - like, said. But we had a conversation about how the leases works, and how this - but wasn't my clear vision of - of putting, like, everything that I had to do in there on the lease.
[61]
Mr Azeez was cross-examined at some length on the Council file notes. His evidence was not always easy to follow. For instance, when asked about Mr Manuel's file note of the conversation on 13 February 2024 ([57] above), he gave the following evidence:
[62]
Q. ... So this is for March 2025. And you see the subject matter is alleged unauthorised truck wash and tyre warehouse. Do you remember receiving - so you called council and then they returned your call at about 1pm. Do you recall that?
A. Yea. But I don't remember. Yeah.
Q. Sorry?
A. Like, I don't really remember 100% what happened on the - yeah.
Q. If you go to the third point down, Mr Manuel says, "The conversation continued and I asked Fatek was the business still operating. Fatek advised the business was still operating. I reminded Fatek a development control order had been issued and that the business was required to cease operating. Fatek replied, I will not stop operating."
A. No. That's not true.
...
Q. Sir, you say this is not truthful.
A. I don't remember telling him that I will - I will not stop operating.
HIS HONOUR
Q. Do you or do you not say that it's not true?
A. SorryQ. I'm now unclear about your evidence. You started by saying that it wasn't true and then you said you don't remember.
A. Yeah. Yeah.
Q. Which is it? Do you not remember whether it's true or are you saying, no, I remember this conversation and that is not true? Which of those is it?
A. I don't remember the conversation.
Q. So it could be true?
A. I remember that I spoke to him, but I don't remember that he told me that if I will - if I'm still operating or not, or whether I told him that I'm - I am operating or not. I don't recall that conversation.
Q. Was the business in fact still operating at the time?
A. Sorry?
Q. Was the business in fact still operating at the time?
A. Yes. But only tyre fitting. ...
[63]
When asked about the breach notices he had received from MCPL, Mr Azeez stated that he was reassured at the time by Mr Stevens and by his lawyers that he could effectively ignore the notices:
[64]
Q. On 28 February when you received this breach notice, did Trump Lawyers contact you and explain to you in words to the effect of, "The landlord says you're in breach of the terms of the lease"?
A. They did. But further to that, that Vincent, the agent, was in contact with me, and he was telling me all the time that it's "because of the pressure that they are - council is making" to them. "That's why they are sending this. But don't worry about it. All you do is, just reply to it and don't - it's they - they don't want to get you out of there." And, like, he wouldn't get me to get more into it and -
...
Q. Sorry, I'll start again. Your evidence is that Mr Stevens told you "not to worry" about it, and that the plaintiffs were "only reacting because they were concerned about council"?
A. Yep.
Q. And did Mr Stevens tell you why they were concerned about council?
A. It's because I did the unauthorised work in there.
...
Q. And, well, you've continued in disregard of [the control orders]. That's true. Isn't it?
A. No. No. I didn't disregard them, but that's when I started engaging the architect and the town planner and the engineer and all these consultants that went all over the - they did the plans and they tried getting the approval, lodging the DA and the BIC and--
Q. But while all that was going on, you were still operating the business.
A. Yes.
Q. You understand that council had told you to stop doing that.
A. Yes.
[65]
Mr Azeez was also directly asked about whether he had been honest throughout his dealings with MCPL and the Council, both directly and through his lawyers:
[66]
Q. And at this point in time you again, I assume, had another conversation with Trump Lawyers.
A. Yes.
Q. And they indicated to you that you were in breach of terms of the lease, did they?
A. Yes.
Q. And that you had to do something to not be in breach of the lease?
A. Yes.
Q. Otherwise, the lease would be terminated?
A. Yes.
Q. So you understood that at the time. The Trump Lawyers had explained that to you.
A. Yes. But on the other side, I was talking to the agent, and the agent was telling me, "Don't worry. Don't stress too much. It's only on papers, but the owners want you in here. They don't want to terminate the lease. And all they are doing is that they ae protecting their selves from Penrith City Council."
...
Q. So this is what Trump Lawyers have written, I assume with your instructions, in reply to the second breach notice. Do you remember that?
A. Yeah.
Q. And so what you say now is, "Cessation of truck wash use." You see under 1 there:
"Our client has ceased operating any truck wash activity from the premises. The premises is now used solely for the purpose of agricultural and rural supplies, including the provision of stock feed, chemical, fertilisers, greenhouse equipment and other goods to customers operating farms and agricultural operations."
Do you remember that?
A. Yeah.
Q. Well, none of that's true, is it?
A. That's the idea that Trump came up with, that they wrote that email. But I didn't clearly read all these points on all - before sending or -
...
Q. And you saw this letter before it went out, that's true? Like, already sent it.
A. Yes.
Q. So you knew it was a lie when he sent it?
A. Yep.
Q. You were quite happy for your lawyers to send a letter that you knew to be untrue to the lawyers of the plaintiff.
A. I really, like - until today, I really wasn't aware -
HIS HONOUR
Q. Answer that question yes or no.
A. Sorry, can you repeat the question again?
Q. The counsel put to you that as a result of the evidence that you've given ... you were happy for your lawyers to tell a lie to the lawyers for the landlord. Is that true or not?
A. Yes.
...
O'CONNOR
Q. ... you've already admitted that you knew the letter was untruthful when it was sent. I'm asking you whether you think, whether you concede that it's a serious matter to have a lawyer send a letter on your behalf that you know to be false, untrue. Do you think that's a serious matter?
A. Yes.
Q. You were content to deal with the plaintiffs in that way. Yes?
A. Yeah.
[67]
The cross-examination left me with an unfavourable impression of Mr Azeez's credibility. His claims that the Musicos agreed for him to use the premises as a truck wash flew in the face of the documentary evidence. As the cross-examination on this issue continued, Mr Azeez's evidence became less and less coherent. It gave every impression of being made up on the spur of the moment.
I found the suggestion that Mr Stevens told Mr Azeez that the breach notices were only to keep the Council of the Musicos' back, and they did not need to be complied with, particularly absurd. It makes no sense. The Council was taking action against MTS, not MCPL. The breach notices involved the exercise of MCPL's own contractual rights under the lease. They had nothing to do with the Council.
I am not prepared to accept what Mr Azeez said on a factual level, over the denials by the Musicos and Mr Stevens. In the end, I did not understand that counsel for MTS was really inviting me to do so. As already mentioned, the cross-claim was not pressed. Given the documentary evidence to which I have referred that is hardly surprising.
Mr Azeez's evidence about his dealings with the Council officers, as recorded in their file notes, was also unimpressive. I thought overall that his evidence on this subject was evasive.
Counsel for MTS sought to play down the file notes by observing that the Council officers had not themselves been called as witnesses. He also described the record of conversations between them and Mr Azeez in the file notes as "impressionistic".
I do not agree. The file notes were tendered as business records. They were not, and could not have been, the subject of objection. The suggestion that they are for some reason of lesser weight than Mr Azeez's testimony should be firmly rejected. They may not have purported to record the whole of the conversations verbatim, but there is no reason to doubt their overall accuracy.
The notes reflect little credit on Mr Azeez. Apparently, he was bent on advancing his commercial objectives, by any means he considered necessary, and irrespective of MTS' legal obligations. The whole problem arose from Mr Azeez's decision to embark on the building of the shed and the opening of his truck wash business without having secured the necessary planning permission. Against this background, his attitude towards the Council officers who had to deal with him was breathtakingly arrogant.
For Mr Azeez to offer the excuse that he was inexperienced and unfamiliar with the business culture in Australia was unconvincing. He at all times had solicitors to advise him. He certainly took no notice of the advice which he received (for free) from the Council officers. Instead, he simply ignored everything he was told by them which did not suit what he wanted to do.
Similar observations apply to Mr Azeez's correspondence with the Musicos in response to the breach notices. By his own admission in cross-examination, his claim in response to the first breach notice that he was conducting a rural services business at the premises was untrue. In fact, he had made the same statement to Mr Manuel of the Council on the previous day, and had been told that it was "extremely incorrect". Even if it had been true, it would not have fallen within the Permitted Use under the lease.
In his response to the second breach notice, Mr Azeez claimed that "commercial" activities at the premises had ceased, although in fact truck-related activities were still going on. Although counsel has advanced an argument before me that this did not contravene the Permitted Use provisions in the lease, that would appear to have been an argument developed by counsel for the purposes of these proceedings. There was no evidence that it had occurred to Mr Azeez or his lawyers at the time he was responding to the second breach notice. In any event I am not prepared to accept, merely on Mr Azeez's say-so, that "commercial" activities had in fact ceased at that point.
Overall, the evidence that Mr Azeez gave to the Court appeared to be no more candid or reliable than what he had said to the Council or to the Musicos. I was not satisfied that he was telling me anything more than what he thought he needed to say in order to advance his commercial interests.
[68]
There was no dispute between the parties as to the principles to be applied in determining MTS' application for relief against forfeiture. There are two, or possibly three, bases on which the jurisdiction may be exercised: see Dyson Heydon, Mark Leeming, Peter G Turner, Meagher, Gummow & Lehane's Equity Doctrines & Remedies (5th ed, 2014, LexisNexis) ("MGL") at [18-250 - 18-265]. But counsel relied exclusively on the first, stated by the learned authors as: "If the forfeiture is meant to secure the performance of a primary stipulation, then prima facie it is a forfeiture against which equity will relieve. Provided that compensation can be made to the party otherwise entitled to the benefit of the forfeiture, relief will generally follow."
The parties accepted the principles laid down by Lord Wilberforce in Shiloh Spinners Ltd v Harding[1973] AC 691 as authoritative. The paradigm case for relief against forfeiture is where there has been a failure to pay rent. Equity regards the power to terminate the lease for non-payment as a security for the payment obligation, so that if payment can be made and the delay in payment properly compensated for, relief will usually be granted.
Prior to Shiloh Spinners, it had been suggested that relief might not be available where the forfeiture was for breach of some non-monetary covenant. This was rejected by his Lordship, at least where the relevant breach sounded in damages for which properly monetary compensation could be given. He said:
[69]
... we should reaffirm the right of courts of equity in appropriate and limited cases to relieve against forfeiture for breach of covenant or condition where the primary object of the bargain is to secure a stated result which can effectively be attained when the matter comes before the court, and where the forfeiture provision is added by way of security for the production of that result. The word "appropriate" involves consideration of the conduct of the applicant for relief, in particular whether his default was wilful, of the gravity of the breaches, and of the disparity between the value of the property of which forfeiture is claimed as compared with the damage caused by the breach.
[70]
Counsel for MTS contended that, on balance, the factors mentioned by Lord Wilberforce should lead to relief against forfeiture being granted. Counsel emphasised that it had never been suggested that there had been any failure by MTS to pay the rent payable under the lease. The rent had at all times been paid punctually. Nor had there been a beach of any other monetary covenant.
Counsel accepted that on the interpretation of cl 10.1(1) which I have adopted, it was not open to MTS to conduct any tyre fitting activities at the premises without first obtaining planning permission (and the BIC for the unauthorised building) from Penrith Council. Counsel also accepted that it was not open to MTS to carry on any truck washing activities without the consent of MCPL pursuant to cl 10.1(1), whether commercial or not, and even if planning permission to do so were obtained. The same was so for any other potential use of the property, whether a commercial or business use or otherwise.
Counsel acknowledged that MTS had no means of compelling MCPL to give any such consent. Therefore, if relief against forfeiture was given, MTS would be under a continued obligation to pay rent but would be unable to make any use of the property, until and unless the necessary planning consents were obtained, and so far as the use of the property for anything other than tyre fitting purposes was concerned, consent was granted. Counsel stated that this was well understood by Mr Azeez, and he was prepared to take the risk of having to pay rent for an indefinite period without any guarantee of ever being able to use the property for commercial purposes, or indeed otherwise.
Counsel submitted that in these circumstances the loss of the opportunity to continue in occupation of the property and to pursue the planning consents would be a clear and significant detriment to MTS. All of the effort which had been put into the property, and in particular building of the building would be wasted. On the other hand, counsel submitted, there would effectively be no prejudice to MCPL. MCPL had led no evidence to show that there was some alternative tenant immediately available to take up the property.
Counsel submitted that, following the grant of the lease to MTS, the enforcement action taken by Penrith Council and the EPA put Mr Azeez in an unenviable position. He had a lot to deal with. It also had to be borne in mind that the EPA's complaints proved unfounded.
Counsel acknowledged that Mr Azeez had not handled himself well. But in counsel's submission, the main explanation for this was that Mr Azeez's lack of commercial experience. He also came from a cultural background where oral agreements were considered more important than what might be said in writing, which at least provided some explanation for why, so counsel submitted, he had seen the matter as one of negotiation with the agent. Counsel submitted that he had learned, and would learn, from his mistakes.
In making these submissions, counsel focused on Mr Azeez's personal circumstances. The tenant of course was MTS, which, as a corporate entity, did not possess personal characteristics of the type possessed by an individual. But it was implicit in counsel's approach that Mr Azeez would continue, as he had in the past, to control and direct MTS' activities.
Counsel submitted that, in these circumstances, I should be satisfied that the breaches which had occurred in the past would not recur. Counsel suggested that if relief against forfeiture were granted, Mr Azeez would be under close scrutiny by MCPL. If he stepped out of line, he was hardly likely to obtain relief against forfeiture a second time.
Counsel for Muscio began by pointing out that throughout the proceedings MTS denied that it was in breach of the lease. The application for relief against forfeiture was made only as a fallback position if the validity of the termination was established.
Counsel referred me to the judgment of Brereton J in Mineaplenty Pty Ltd v Trek 31 Pty Ltd[2006] NSWSC 1203 at [69]- [70]. His Honour noted that it had been said in some cases that a tenant could only obtain relief against forfeiture if the breach was admitted. But this is not an absolute rule, and it did not prevent the grant of relief in the case before his Honour. He said (at [70]):
[71]
Here, [the tenant] indicated at the outset of the hearing that if the arrears of rent issue were resolved adversely to it, it would pay the arrears. That it contested its liability for those areas, and whether there was any breach, does not deprive it of a claim for relief against forfeiture, at least so long as the dispute was bona fide.
[72]
Counsel accepted his Honour's statement of the law, but emphasised the reference to a "bona fide" dispute. Counsel submitted that the present case was far from a gentlemanly disagreement about the interpretation of the terms of the lease. Through its lawyers, MTS had done everything it could to place obstacles in the way of MCPL. The points raised had been unmeritorious. Counsel submitted that, on its own, MTS' course of conduct was a reason to refuse relief.
Counsel also referred me to the decision of Pembroke J in Casquash Pty Ltd v NSW Squash Ltd (No 2)[2012] NSWSC 522. In that case his Honour said:
[73]
... On any view, it would not be in the interests of justice to exercise my discretion in favour of the plaintiff. This is no ordinary commercial lease. The lessor and lessee are bound under this lease to co-operate with each other to an extent that is not always usual. Annexure B to the lease lists many aspects of the premises that require rectification and repair. The defendant is required to carry out the works over the 5 year period of the lease. Those works must be undertaken to the satisfaction of the plaintiff. The parties cannot therefore avoid each other. They are bound to remain in a proximate relationship during the term of the lease.
I will not detail all of the unsavoury evidence that reflects the wholesale breakdown in the relationship or the wilful and obdurate conduct on behalf of the plaintiff. The relationship is poisonous, acrimonious and unsalvageable. ... The plaintiff's breaches were deliberate and recalcitrant. The monetary breach was the ultimate result of the insistence by [the tenant] on a form of the lease that was procured by conduct that I have characterised as dishonest. The non-monetary defaults were the result of wholly unreasonable behaviour. There is no hope for the continuation of a stable commercial relationship. [The tenant] said herself that the relationship between the plaintiff and the defendant was untenable. Some evidence suggested that she wanted to send the defendant "broke". She refuses to deal with anyone on behalf of the defendant other than through a psychologist whom she has appointed as her representative. This is an extreme case. If I grant relief against forfeiture, there will only be more disputation. And there will likely be more litigation.
[74]
Counsel submitted that similar considerations applied in the present case. Mr Azeez's conduct had not merely been unfortunate or mistaken, but dishonest. The Musicos were entitled to want nothing more to do with him. There was nothing unconscionable about them exercising MCPL's legal right of termination. Counsel pointed out that the case for MTS did not involve an acknowledgment that Mr Azeez was out of his depth and somebody else who was trustworthy and competent could be brought in to run the company. Nor did it contain any acknowledgement by Mr Azeez which reflected on his behaviour, acknowledged it was profoundly wrong, and gave confidence that it would not be repeated in future.
[75]
In the course of the argument, I asked counsel for MTS what compensation would be offered for the breach of the Permitted Use clause. Counsel replied that no damage had been suffered, and accordingly there was no compensation to be paid (although counsel did accept that MTS would be obliged to pay MCPL's costs).
This response illustrates a feature of the case which may distinguish it from other cases where relief has been granted against a termination for breach of a non-monetary covenant. In cases involving, for instance, breach of repair obligation, the covenant may be assessed and properly compensated. The present case is not necessarily of that character.
The interest protected by clauses 10.1, 10.2 and 10.15 was MCPL's interest in having a commercial business operating under planning permission on the subject land. The planning permission would, of course, run with the land and enure to MCPL's benefit. Furthermore, the successful operation of a business on the property might have been expected to build up its leasing profile and make it more attractive on the market in the future. I accept that it would be impracticable to decree that MCPL be compensated for the breaches of the clauses so far committed by MTS. But that is not so much because no loss has been suffered. It is more that, having regard to the nature of the interest protected, the assessment of such loss in dollar terms is not practicably possible, at least at the moment.
In these circumstances, one might ask whether relief against forfeiture should be available at all. The right to terminate for such a breach cannot realistically be seen as a form of security for the payment of compensation. Thus, it may be argued, the rationale for granting relief against forfeiture falls away. This point was not, however, taken by counsel for MCPL. I will therefore proceed on the assumption that relief against forfeiture is available.
There is another preliminary point. At times the argument from counsel for MTS tended to treat the application for relief against forfeiture as a matter depending on the balance of convenience between the parties, as if the Court were dealing with an application for an interlocutory injunction. In my view such an approach is fundamentally incorrect.
The doctrine of relief against forfeiture is not concerned with hardship to the tenant as such. The focus is on the landlord. What must be proved is that, in the circumstances of the case, the exercise of the landlord's legal right to terminate the lease would be unconscionable. The factors mentioned by Lord Wilberforce in Shiloh Spinners fall to be considered only from that perspective.
On a factual level**,** it is hardly a correct characterisation of the evidence to say that the breaches of the lease by MTS were merely the result of "mistakes" or "inexperience" on the part of Mr Azeez. On my findings, they were part of a concerted course of conduct by him which involved studiously ignoring MTS' legal obligations (both under the lease and independently of it) with respect to the use of the property and deliberately obfuscating what was going on.
Even if I took a less unfavourable view of Mr Azeez's conduct, it would make little difference. For reasons already given, the focus of the Court's enquiry is not, as such, the degree of fault surrounding the breach. The real significance of the evidence is what it says about Mr Azeez's trustworthiness and reliability in the future.
If the application for relief against forfeiture is successful, MCPL will be required to execute a fresh lease in favour of MTS for a period of almost three years, followed by a four year option for a further extension. Such a lease will contain implied obligations of good faith, and, perhaps reasonableness: Alcatel Australia Ltd v Scarcella[1998] NSWSC 483; (1998) 44 NSWLR 349. It will recreate a long-term business relationship between the parties involving, on MCPL's side, as well as MTS's "fidelity to the bargain": United Group Rail Services Limited v Rail Corporation New South Wales[2009] NSWCA 177 at [71]- [73]. Those obligations might require, in some circumstances, for MCPL to take positive action to advance MTS's commercial interests: Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd[1979] HCA 51; (1979) 144 CLR 596, 607-608.
More specifically, if the lease is reinstated, MCPL will have a clear interest in the efficient and successful prosecution of an application for planning permission by MTS as lessee (see the references to cll 10.1, 10.2 and 10.15 above). MCPL also has wider interests in the proper conduct of MTS' business. Pollution generated by MTS' activities may become the responsibility of MCPL as owner if any remains on the site at the end of the lease: Contaminated Land Management Act 1997, s 6. MTS' activities also have the potential to create liabilities for MCPL towards third parties (cl 10.2(2)).
It is all very well for counsel for MTS to say that Mr Azeez has learned his lesson and will behave properly in future. His conduct to this point hardly inspires confidence. There is no evidence that he has accepted responsibility for that conduct and has changed his ways.
And a more fundamental problem emerges from counsel's further submission that the Court can be satisfied that things will change because Mr Azeez will be under increased scrutiny in future, and he would be unlikely to get further relief in the event of further breaches. Even if that were so, why should the Musicos have to bear the risk, and incur the cost, of giving Mr Azeez another opportunity? They have no obligation to underwrite the development of his business career. All that is required of them is not to exercise MCPL's legal rights unconscionably.
The degree of cooperation which would be required of MCPL if the lease is reinstated in the present case may not be as close as it was in Casquash. The likelihood of future misconduct by the tenant and further disputation between the parties may not be as great as it was in that case. But in my view the prior conduct of Mr Azeez amply justified a decision by the Musicos to have no further business dealings with him, and not to continue to entrust the property to him as a tenant. As the case has been conducted on the footing that he will continue to direct the affairs of MTS, the Musicos were entitled to take the same view toward that company.
Mr Azeez's conduct in the litigation has only provided further justification for such a decision. In saying this, I am not confining myself to Mr Azeez's performance in the witness box. The whole defence had little merit. To that extent I have taken Mr Azeez's conduct into account as part of the analysis of the factors mentioned by Lord Wilberforce. Whether it could also be taken into account as a separate factor requiring refusal of the application for relief as a matter of discretion does not need to be considered in the present case.
For these reasons, at the close of the argument, I had formed the view that MTS had failed to make out its case for relief against forfeiture. But this was subject to one possible reservation.
I did not think that I could ignore the fact that termination of the lease would leave MCPL in possession of the site with a large, newly constructed, purpose-built shed on it. If the Musicos were to put in a new tenant and obtain the necessary planning permission, that might conceivably be of considerable commercial benefit to them. MCPL would be receiving a windfall. Mr Azeez might be able to say that the Musicos had taken over his work for nothing and reaped the benefit of it.
But that would only be so if the Musicos actually intended to retain the shed. If they proceeded with demolition, the question would not arise. Instead, it would demonstrate in the clearest possible way that the decision by the Musicos to terminate the lease was not driven by any desire to achieve some sort of windfall benefit, but rather was a legitimate determination to have nothing more to do with Mr Azeez or his companies.
In these circumstances it occurred to me that the position could be put beyond doubt if MCPL gave an undertaking that, if the application for relief against forfeiture were dismissed, it would proceed to demolish the shed. I should make it clear that such an undertaking would not be something which the Court would be entitled to require from MCPL. MCPL is seeking possession and damages, which are legal remedies. It is not seeking equitable relief, which might properly be the subject of the imposition of terms.
But, even if MCPL could not be required to give an undertaking, it could still do so voluntarily as a convenient evidentiary shortcut. If such an undertaking were given, the case, in my view, for refusal of the application would become overwhelming.
[76]
The arguments of the parties finished at the end of the second day of the hearing. At the resumption on the third day, I informed the parties that I had concluded that:
[77]
(1) the notice of termination was valid;
(2) if an appropriate undertaking was given by MCPL to proceed with demolition of the shed, I would refuse relief against forfeiture.
[78]
Following debate about the terms of the undertaking, counsel for MTS sought an undertaking the terms of which paralleled Penrith Council's demolition order of 14 May ([77] above]. Counsel for MCPL obtained instructions that an undertaking in these terms would be given.
This resolved the claims which had been debated before me on 29 and 30 September. Counsel for the parties agreed on the form of the orders required to reflect my conclusions. The agreed orders were that I should note MCPL's undertaking, make a declaration that the lease had been validly terminated, order possession and dismiss the application for relief against forfeiture.
A question arose as to when MTS should vacate. In the end it was agreed that the date for vacation should be seven days after the delivery of this judgment. But at the request of counsel for MTS, I reserved liberty to MTS to apply for a stay during that seven-day period in the event of an appeal (in fact, leave to appeal would be required: see Narellan Franchise Pty Ltd v RBME Pty Ltd[2023] NSWCA 139 at [25]- [26]).
On my findings, MCPL is now entitled to damages on two bases. First, it is entitled to damages in the nature of mesne profits for trespass. Secondly, it is entitled to damages for breach of contract. This in turn is made up (at least in theory) of damages for pre-termination breach and damages for loss of the bargain consequent upon a valid termination for breach.
Eventually it was agreed that the damages for mesne profits should be assessed at the rate specified in the lease. But the amount payable under the lease includes not only the rent but also outgoings, the calculation of which created some complexities. The quantum could not in any event be determined until after vacation had occurred. It was agreed that the issue should be deferred until that had happened.
It was also agreed to defer the assessment of any contractual damages to which MCPL is entitled until after the demolition of the building. By that point the actual cost of demolition (to the extent relevant) will be known.
As to costs, counsel for MCPL agreed that MTS should have its costs of the contempt motion. It was also common ground that MTS and the guarantors would have to pay MCPL's costs of the abandoned cross-claim.
Counsel for MTS accepted that MCPL has succeeded, and is entitled to its costs on the claims for relief which are the subject of this judgment. The general costs of the proceedings to date will follow the costs of those claims.
Counsel submitted, however, that, while MTS would be liable for these costs, the guarantors should not be. Counsel characterised the issue as involving only MCPL as plaintiff and MTS as defendant.
I do not agree. Counsel appeared at the hearing for both MTS and the guarantors. This was appropriate, as it was part of the guarantors' defence to the claim that there was no principal liability, or that relief against forfeiture should be given. In my view costs follow the event not only against MTS but also against the guarantors.
It is, however, not possible to make final orders dealing with the costs of the proceedings. There are, as I have indicated outstanding questions of damages. Nor would it be possible to make a final order dealing with the costs of the proceedings to date. Some of the costs which have been incurred prior to this hearing (for instance the preparation of the expert report to which I have referred above) are costs attributable to the damages claim and MTS may not ultimately be successful in recovering them.
It seems to me, however, that the case would be a suitable one for the making of an order for a lump sum payment on account of the costs for which MTS and the guarantors will ultimately be liable, following my practice in cases such as Omutta Pty Ltd v Wilson (No 2)[2019] NSWSC 401 and Rhino Rack Australia Pty Ltd v Hub Computing Services Pty Ltd[2021] NSWSC 231. In determining the amount, it will be necessary to make some allowance for MTS' success on the contempt motion, and also excluding costs which may ultimately depend upon the outcome of the reserved damages claim. It was ultimately agreed between the parties that MTS could make an application for such an order when the matter returns to court for further mention in due course.
Following the argument on 1 October, I indicated that I would put my reasons in writing and make the orders foreshadowed on that day when I delivered those written reasons.
While preparing the written reasons, it came to my attention that the copy of the lease in evidence had not been stamped (presumably this is the reason, or one of the reasons, why it has not been registered) and I raised with the parties the question of compliance with s 8 of the Duties Act 1997. The solicitors for MCPL contended that MTS was liable for any applicable duty but nevertheless gave the usual undertaking as to stamping and payment. The solicitors for MTS contended that the lease was not dutiable. Now that a suitable undertaking has been given, it is unnecessary to consider the question of dutiability any further for the moment.
The orders I now make are:
[79]
(1) Declare that the lease over the land being Folio Identifier 7/A/2566 ("the Property") dated 4 December 2024 ("the Lease"), was validly terminated by notice given by the plaintiff to the first defendant on 7 April 2025.
(2) Order that the plaintiff have possession of the Property after 24 October 2025.
(3) Grant leave to issue a writ of possession forthwith upon the plaintiff becoming entitled to possession under order 2.
(4) Costs of the proceedings to date reserved.
(5) Order that the plaintiff's claims for damages for trespass and breach of contract be determined separately, and at a later stage of the proceedings.
(6) Adjourn further proceedings to the Expedition List on 21 November 2025.
(7) Grant liberty to apply for a stay of these orders, or any of them, pending appeal, such liberty to be exercised before 24 October 2025.
Parties
Applicant/Plaintiff:
Musico Corporation Pty Ltd
Respondent/Defendant:
Master Truck Service Pty Ltd [2025] NSWSC 1226
Legislation Cited (16)
Consumer Act 2010
Land Management Act 1997
Property Act 1900
Environment Operations Act 1997
Environmental Planning and Assessment Act 1979
Planning and Assessment Regulation 2021
Planning and Assessment Act 1979
Environmental Planning and Assessment Regulations 2021
Consumer Act 2010
Land Management Act 1997
Property Act 1900
Environment Operations Act 1997
Environmental Planning and Assessment Act 1979
Planning and Assessment Regulation 2021
Planning and Assessment Act 1979
Environmental Planning and Assessment Regulations 2021
