Nameless, Shameless and Legless Pty Limited v 2 Roslyn Street Pty Limited - [2004] NSWSC 519 - NSWSC 2004 case summary — Zoe

NSWNSWSC

Nameless, Shameless and Legless Pty Limited v 2 Roslyn Street Pty Limited

[2004] NSWSC 519

Supreme Court of NSW|2004-06-11|Before: Einstein J, Mr J

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Court

Supreme Court of NSW

Decision date

2004-06-11

Before

Einstein J, Mr J

Source

Original judgment source is linked above.

Judgment (51 paragraphs)

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CITATION : Nameless, Shameless and Legless Pty Limited v 2 Roslyn Street Pty Limited [2004] NSWSC 519 HEARING DATE(S) : 10/06/04, 11/06/04 JUDGMENT DATE : 11 June 2004 JURISDICTION: Equity Division JUDGMENT OF : Einstein J DECISION : Exercise of option upheld.

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CATCHWORDS : Conveyancing - Option exercise - Relief against effects of breach of conditions - Notices given under Conveyancing Act - Forms - Failure to comply with form - Substantial compliance Bankruptcy Act 1966 LEGISLATION CITED : Bankruptcy Regulations 1996 Conveyancing Act 1919 (NSW) Interpretation Act 1987 (NSW) A Judgment Debtor, In Re, 530 of 1908 (1908) 2 KB 474 Bay Marine Pty Ltd v Clayton Properties Pty Ltd (1984-1985) 9 ACLR 780 Brennan v Kinjella Pty Ltd (1993) 6 BPR 13,168, BC 9301778 General Motors Acceptance Corporation Australia v Marshall (2002) 124 FCR 210 James v Federal Commissioner of Taxation (1955) 93 CLR 631 CASES CITED : Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 Mannai Limited v Eagle Star Association Company Ltd [1997] 2 WLR 945 Marshall v Council of the Shire of Snowy River (1994) 7 BPR 14,447 Pillai v Comptroller of Income Tax [1970] AC 1124 Sentron Pty Limited v Australian Securities and Investments Commission, [2000] WASC 272 Shephard v Blueberry Farms of Australia (Corindi) Limited [2001] FMCA 2 PARTIES : Nameless, Shameless and Legless Pty Limited (ACN 098 097 440) (Plaintiff) 2 Roslyn Street Pty Limited (ACN 104 336 727) FILE NUMBER(S) : SC 2732/04 COUNSEL : Mr J Hogan-Doran (Plaintiff) Mr V Gray (Defendant) SOLICITORS : Davis Breene Conti (Plaintiff) Denes Ebner (Defendant)

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2732/04 Nameless, Shameless and Legless Pty Limited v 2 Roslyn Street Pty Limited JUDGMENT The proceedings 1 The plaintiff ["NSL"] is the lessee of the property known as Part Ground Floor, 2 Roslyn Street, Kings Cross ["the premises"]. Panvena Pty Limited had taken a lease of the premises from F & B Trading Company Pty Limited on 1 July 2001 under an unregistered lease ["the lease"]. That lease was transferred to the plaintiff on 10 October 2001. 2 On or about 21 May 2003, the present defendant became the registered proprietor of the property, taking title from F & B Trading Company Pty Limited. 3 Apparently, the plaintiff, at or about the same time as taking an assignment of the lease, purchased the business of Panvena. Following acquisition of that business, the plaintiff spent some $400,000 in fit-out of the premises. 4 The lease was not registered until 3 November 2003. The initial term of the lease was three years, so that the lease has been due to terminate in terms of that term on 30 June 2004. 5 Clause 49 of the lease conferred on the plaintiff an option to renew the lease for a further period of three years. The lease granted to the plaintiff was amended on 26 October 2001, so that three options to renew as to each for a term of three years were granted to the plaintiff. 6 The issues which fall for determination in terms of the amended summons presently before the court concern the purported exercise by the lessee of an option to obtain the first of the three-year option terms. Those issues encompass a number of parameters, and these may generally be gleaned by the precise claims to be found in the amended summons, which claims are as follows: · "A declaration that the lease being registered lease number 7828319V ("the Lease") including its right to exercise an option under clause 49 of the Lease ('the Option") is in force and effect between the plaintiff and the Defendant. · Alternatively to 1, an order that the Plaintiff be relieved from any forfeiture of the Lease by reason of any late payment of rent. · A declaration that the Plaintiff's entitlement to exercise the Option does not depend on performance by the Plaintiff of any specified obligations under the Lease. · Alternatively, a declaration that the Plaintiff has not breached any specified obligation under the Lease conditional for the valid exercise of the Option. · Alternatively, a declaration that the document served by the Defendant on the Plaintiff purporting to give notice for the purposes of s.133E of the Conveyancing Act 1919 (the "Notice") is invalid under, and of no effect for the purposes of, the Act. · Alternatively, a declaration that the Plaintiff is not precluded from exercising the Option by reason of the Notice and any breach specified therein. · A declaration that the Plaintiff has validly exercised its option to renew the Lease. " 7 As is apparent from the claims to relief, a number of alternative declarations and orders are sought, depending upon the proper analysis of the present legal position. The option provision 8 The option clause includes the following:

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" 49. Should the lessee desire to take a renewed lease of the premises for a further term of three years from the expiration of the term of this lease and of such desire shall, prior to the expiration of the term, give to the lessor not less than three months' notice in writing and shall, in the meantime, duly and punctually pay the rent reserved by this lease at the times herein appointed for payment and shall duly perform and observe the covenants and agreements by and on the part of the lessee contained in this lease up to the expiration of the term here or by granted. The lessor will, at the expense of the lessee, demise to the lessee the premises for a further term of three years at a rental for the first year of the further term to be the annual rental hereby reserved, increased in accordance with the provisions of clause 37 thereof. " 9 As earlier indicated, there are then provisions for the subsequent exercise of the further option of the entitlement to the further terms of years, it being unnecessary to set out the balance of clause 49 presently. 10 It will be necessary shortly to examine the particular events chronicling the history of the relationship with and dealings between the present defendant and the plaintiff, but before so approaching the history, it is appropriate to mention two preliminary points which were the subject of detailed submissions and which, had they been answered adversely to the defendant, would likely have meant that the proceedings would have been determined. 11 Those preliminary points concern the notice given by the plaintiff to the defendant already mentioned, purporting to exercise the option to renew and given on 25 March 2004. Likewise, embraced within the ambit of those preliminary points is the fact that, by letter dated 6 April 2004, the defendant purported to serve on the plaintiff a notice under section 133E of the Conveyancing Act 1919 in respect of the lease. 12 The first of these preliminary issues concerns the plaintiff's proposition that the option clause here under consideration simply does not attract the operation of part 8, division 3 of the Conveyancing Act 1919 for the reason that, upon the proper construction of the option clause, it cannot be said that the lessee's entitlement to the option is made to depend upon performance by the lessee of any specified obligation [Section 133E(1)(b) of the Conveyancing Act]. 13 The issue turns upon the meaning of the words in clause 49:

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The section only applies if the lease makes performance of the obligations of the lease a condition precedent to the exercise of the option. There is no such express clause in the instant agreement for lease. None is relied upon. Thus s133E does not apply. I am prepared to accept that the exercise of the option by Mr Marshall was valid. I will even assume for these purposes that, as between the parties, an equitable lease was renewed for another five years. However, this does not change the fact that Mr Marshall repudiated his obligations under the agreement for lease. By doing so he entitled the Council to terminate the agreement for lease. S133E does not, therefore, affect the Council's right to terminate the agreement for lease for repudiation or for fundamental breach. The Council did not argue that Mr Marshall was precluded from exercising his option. In fact, it is the acceptance that the exercise of the option was valid which has given rise to the need for the Council expressly to terminate the agreement for lease, the original term of which had expired." 15 The submission of the defendant is that the words "in the meantime" mean the period from the commencement of the lease up until the time that the notice exercising the right to give the option is given and from that period on. It seems to me unnecessary to deal with this submission for the reason that I am satisfied that the words "shall duly perform and observe the covenants and agreements by and on the part of the lessee contained in this lease up to the expiration of the term here or by granted" are not qualified by the anterior phrase "in the meantime". 16 In short, upon the proper construction of the clause, the entire period of the lease is seen to be covered in terms of requiring the lessees compliance with the obligation to duly perform and observe the covenants and agreements up to the expiration of the term, which obligation relevantly may be seen to be a condition precedent to the entitlement to exercise the option. 17 The second short preliminary issue which was argued may be exposed as follows: Mr Gray, who appears for the defendant, put forward the proposition that his client sought to take what he accepted was a jurisdictional prerequisite to the whole of the proceedings. This was to rebut the plaintiff's proposition that the notice purporting to have been given by the defendant pursuant to section 133E of the Conveyancing Act 1919 was valid. 18 Had it been the case that this issue would be determined against the defendant, then, as I had understood it, by definition, declarations 1 and 6 as sought in the amended summons would have required to be made. The matter lies in very short compass 19 Section 133E is in the following terms:

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"I don't think that the court has any discretion to apply a benign construction to the requirements of section 133E so as to read the notice in a manner contrary to its terms. There is in my opinion no "slip rule" applicable to such a notice." 28 The lack of compliance in Bay Marine was, of course, quite different to that presently before the court. Further, although no doubt the matter would not have been decided differently, the court was not apparently taken to the Interpretation Act (1987) (NSW) in Bay Marine. 29 Bay Marine has been referred to with approval from time to time, cf Brennan v Kinjella, Butterworth Cases 9301778 at 11, per Young J; Sentron Pty Limited v Australian Securities and Investments Commission, [2000] WASC 272, per Owen J, who at [13] agreed with Young J in terms of the point that where a statute requires a notice to explicitly state something, the notice is invalid if that thing is not stated. 30 The decision of the House of Lords in Mannai Limited v Eagle Star Association Company Ltd [1997] 2 WLR 945, including particularly the speech of Lord Hoffman contains a signal and close analysis of those authorities dealing with obligations of strict compliance with the terms of contractual documents, including an examination of the need for certainty where a particular document is required to be dealt with by third parties to such documents. 31 A tenant had been entitled by a clause in certain leases to determine the leases by serving not less than six months' notice in writing on the landlord or its solicitors to expire on the third anniversary of the term commencement date. Notices were given to determine both leases on 12 January 1995. The trial judge had held that on the true construction of the leases and the notices which were served, the terms granted by the leases were determined on the last moment of 12 January 1995, being the first moment of 13 January 1995. 32 The Court of Appeal allowed the landlord's appeal holding that a notice stated to take effect on 12 January could not operate to determine the lease on 13 January and that the notices served were, therefore, infective. On appeal, a majority held that the construction of the notices had to be approached objectively, and that the question was how a reasonable recipient would have understood them, bearing in mind their context; that the purpose of the notice was to inform the landlord of the tenant's decision to determine the lease in accordance with the break clauses; that a reasonable recipient with knowledge of the terms of the lease and of the third anniversary date would have been left in no doubt that the tenant wished to determine the lease on 13 January 1995 but had wrongly described it as 12 January; and that, accordingly, the notices were effective to determine the leases. 33 Lord Hoffman [at 972] expanded the field of reference from notices required to be given under contract to include documents in which the need for certainty was paramount. His Lordship put the matter as follows:

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Failure to direct the attention of the lessee to these procedural and substantive matters in s.133F is a fatal failure on the part of the lessor. It is in no way preserved by the service of the notice · By contrast, strict compliance is in no way onerous to the Lessor. The slipshod and careless drafting of the s.133E Notice by solicitors for the Defendant is precisely the sort of error that an insistence on strict compliance with s.133E is directed towards. · Strict compliance is similarly required in respect of references to statutory provisions referred to in Bankruptcy Notices. A notice issued under s.41 of the Bankruptcy Act 1966 must be in accordance with the form prescribed by the regulations: s.41(2). The form prescribed by the reg 4.02(1) of the Bankruptcy Regulations 1996 is that in Schedule 1 Form 1. Section 306 of the Bankruptcy Act relevantly provides that proceedings under that Act are not invalidated by "a formal defect or irregularity unless the Court…is of the opinion that substantial injustice has been caused by the defect…" It has long been held that s.306 is applicable to bankruptcy notices: Kleinwort Benson Australia v Crowl (1988) 165 CLR 71 at 77. · However, a defect or irregularity will be characterised as "substantive" rather than formal if: (a) it fails to meet a requirement made "essential" by the Act; or (b) it is one which "could reasonably mislead a debtor as to what is necessary to comply with the notice": Kleinwort Benson at 79. · In Shephard v Blueberry Farms of Australia (Corindi) Ltd [2001] FMCA 2 a bankruptcy notice misdescribed the relevant section of the Supreme Court Act 1970 (NSW) under which interest on the judgment sum was claims, by referring to s.94 (interest up to judgment) rather than s.95 (interest on debt under judgment or order) of that Act. It was held that this was invalid by Driver FM. Driver FM's overall approach was approved by Gyles J in the Federal Court in General Motors Acceptance Corp Australia v Marshall (2002) 124 FCR 210; [2002] FCA 1006, reversed on other grounds by the Full Court on appeal [2003] FCAFC 45. · In the leading judgment of Mason C.J., Wilson, Brennan And Gaudron JJ in Kleinwort Benson v Crowl, their honours held (at 79): The authorities show that a bankruptcy notice is a nullity if it fails to meet a requirement made essential by the Act, or if it could reasonably mislead a debtor as to what is necessary to comply with the notice: James v Federal Commissioner of Taxation (1955) 93 CLR 631, at 644; Pillai v. Comptroller of Income Tax [1970] AC 1124 at 1135. In such cases the notice is a nullity whether or not the debtor in fact is misled: In Re A Judgment Debtor, 530 of 1908 (1908) 2 KB 474, at p 481. · Similarly, the failure to properly describe the relevant section could reasonably mislead a lessor as to what is necessary to successfully seek an order from the court under s.133F."

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Finding 35 The question is a close one. In my view, the court, for very obvious reasons, should be particularly careful in only permitting a variance from the very precise wording set out in the definition of prescribed notice at section 133E(3)(b), where the relevant omission is clearly one which does not remove the document from the description "one of substantial compliance with the prescribed form". 36 However, bearing in mind the terms of the Interpretation Act already set out, it does seem to me that there is substance in the submission put by Mr Gray that the obligation to give the notice was indeed satisfied by the giving of the notice which substantially complied with the requirements of section 133E. What was required to be provided in the notice was information to a lessee communicating the necessity for the lessee to approach the court and to obtain an order under section 133F and making the point that in the absence of the obtaining of any such order, the lessor proposed to treat the breach as precluding the lessee from an entitlement to the option. 37 The reference in terms to section 133E of the notice directed the lessee to the procedure which led to the issue of the notice: section 133E itself referred to section 133F. In short, the lessee was thereby given the substance of the information that it needed in order to come to court under division 4 and to seek the appropriate order. 38 For those reasons, in the result, the defendant has been successful in terms of the submissions which came forward on both of the preliminary points. The remaining issues 39 I turn then to the balance of the issues before the court. In doing so, it is necessary, as I have earlier indicated, to carefully chronicle the precise history of the relationship with and dealings between the lessor and the lessee, who are presently parties before the court. 40 In commencing that journey, it should be noted that the current lessee has relevantly, pursuant to the assignment, been the lessee from 10 October 2001 up to the present point in time - a period of approximately 32 months. The difficulties such as have been thrown up in the history about to be chronicled are difficulties which generally commenced during the period between approximately May 2003 and the present time, something generally in the order of one year. That fact should be borne in mind when one turns to the particular problems which have beset this lessee in terms of being able to pay its rent on time and sometimes at all. 41 The background to be now chronicled will include occasions when the lessor has changed the locks, where the lessee has changed the locks and other disparate matters. 42 It is convenient [because this was generally the subject of a basic consensus at the bar table] to first chronicle the precise dates of the making of payments for particular months as between September 2003 and the present. 43 Counsel are agreed, and, hence, it is unnecessary for the court to now travel through the particular affidavit and other evidence before the court on the topic that the monthly rental has been as from approximately September last year to the present time $13,639.15. 44 On 15 September 2003 the sum of $3,064.75, part of the September rent, was apparently paid. 45 On 31 October 2003, the balance of the outstanding rent for the September month, together with the October and November instalments of rent were apparently paid. 46 The rent for the month of December 2003 was paid on or about 19 December 2003. 47 The whole of the rent for the month of January 2004 was paid on 16 January 2004, or thereabouts. 48 This takes us to February 2004. 49 It was from approximately the month of January, particularly in mid and late January and during February, that there were particular problems which require to be examined in the course of the chronicling of the particular events to which I now turn. The lesser re-enty 50 On 19 September 2003, the lessor re-entered the premises terminating the lease, as I understand it, on the basis of a late payment of rent. Proceedings for relief against forfeiture were commenced on that very day. Those were proceedings 4973 of 2003. 51 The lease was itself registered on 3 November 2003, and on the very same day that the lease was registered, consent orders were made granting the plaintiff relief against the forfeiture of its estate and interest as lessee by reason of events referred to in an affidavit which had been made by Mr John Russell Innes and sworn on 19 September 2003. 52 The terms of that order obliged the plaintiff to pay such compensation to the defendant as the defendant should be entitled by law on a grant of relief against forfeiture for non-payment of rent as agreed or in default of agreement as determined by the Master. The court further noted the agreement of the parties as follows. "The plaintiff to pay to the defendant by 3 November 2003 the sum of: (a) arrears of rent as at 31 October 2003, $24,213.55.

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(c) the sum of $20,000, total $57,852.70." 53 The agreement further provided that the defendant would hold the sum of $20,000 in lieu of the bank guarantee which was required as the security bond pursuant to clause 44 of the lease. 54 It is appropriate to shortly refer to the fact that clause 44 of the lease did require a bank guarantee by the lessee in the sum of $20,000, which had apparently, so the court has been informed, been provided by F & B Trading Company Pty Limited. However, on the occasion when the present defendant became the lessor, there were some questions as to what was the position inter se as between F & B Trading Company and Panvena. 55 Apparently, paragraph 3 of the agreement noted by the court on 3 November 2003 was intended to deal with the previous position, it being, as far as the present litigation is concerned, common ground at the bar table that the court may disregard the anterior events and regard the production of the $20,000 in lieu of the bank guarantee in the same general way as the court would have approached the matter if the present lessee had been the only lessee and had at the beginning of the lease provided a $20,000 bank guarantee. So that it is unnecessary to presently deal in any depth with paragraph 4 of the agreement noted on 3 November 2003. 56 The evidence before the court is to the effect that problems which arose in terms of the failure of the lessee to pay relevant rent instalments centrally concerned agreements entered into between the lessee and Mr Ricky Martin Bray. The heads of agreement are set out in a memorandum dated 23 October 2003, an annexure to the affidavit of Mr Innes of 7 June 2004, which heads of agreements evidences an agreement between those parties to the effect that Mr Bray was to contribute $650,000 to NSL by way of capital and that NSL would, within 14 days, cause the transfer of issued ordinary fully-paid shares and/or allotment of new ordinary fully-paid shares to Mr Bray to the combined value of 39 per cent of the total issued capital of NSL. 57 The affidavit of Mr Innes of 7 June 2004 then chronicles a series of occasions when Mr Bray deposited cheques into the bank account of the lessee which were not honoured and treat with Mr Bray's excuses in that respect. Mr Innes has deposed: · "On 23 October 2003 NSL entered into an agreement with Ricky Martin Bray whereby Ricky Bray would contribute $650,000 to NSL by way of capital and in exchange NSL would cause to transfer and/or allot new ordinary shares in NSL to the combined value of 39% of the total issued capital. Annexed hereto and marked with the letter "A" is a copy of that agreement. · On 25 October 2003 Ricky Bray deposited a cheque in the sum of $650,000 into the bank account of NSL. · On or about 5 November 2003 I received a notification from the St George Bank informing me that the cheque from Ricky Bray had been dishonoured and annexing the cheque. A copy of this notification and cheque is annexed hereto and marked with the letter "B". The notification wrongly refers to the cheque value as $6,500. · On or about 5 November 2003 I had a conversation with Ricky Bray using words to the following effect: Mr Innes: "I have a letter from the bank and your cheque has been returned. It was drawn from a closed account. What is going on?"

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(i) medical appointments for various illnesses; (ii) heart catheter procedures; (iii) period in St Vincent's Hospital and Sydney Hospital; (iv) Respiratory illnesses; (v) Delays in the granting of probate; (vi) Delays in Carroll & O'Dea Solicitors releasing funds; (vii) Challenge to the Will by his mother's stepfather which had been lodged in the Local Court at Kiama. · I now know that Ricky Bray's mother is still alive and well. I have been informed by Howard Harrison from Carroll & O'Dea Solicitors and believe there is no estate and no funds to be distributed by Carroll & O'Dea Solicitors. · I also know through my investigations including calling St Vincents and Sydney hospitals and calling Carroll & O'Dea Solicitors that the matters referred to in paragraph 21 above are false. · NSL intends to commence proceedings for specific performance of the agreement (annexure "A" hereto) against Ricky Bray upon the conclusion of these proceedings. Annexed hereto and marked with the letter "CC" is a copy of a letter from Davis Breene Conti Solicitors to Rick Bray dated 17 May 2004. · I have referred the above conduct of Ricky Bray and the dishonoured cheques to the CBD Serious Fraud Squad. Annexed hereto and marked with the letter "D" are a series of emails of March 2004 in relation to NSW Police reference number C19850615. · On April 2004 I confiscated a Westpac cheque book from Ricky Bray as it stated "Ricky Bray trading as the Venus Room" as it was authorised by NSL and had been obtained improperly by Ricky Bray. This cheque book is exhibited to me and marked with the letters "JRI-17". " 58 On 15 December 2003, Mr Innes was informed by the managing agent, Metro Commercial, that a particular cheque from Mr Bray for the December rent had been dishonoured, Mr Bray having purported to pay that rent on about 11 December 2003. Mr Innes then took steps to pay that instalment of the rent on 19 December 2003. 59 Similar problems seem to have arisen through January 2004 and, as I have said, the rent was paid in full on 16 January. There is evidence before the court in the form of affidavits from Ms Conti of 27 May 2004 and Mr Braune of 31 May 2004 as to the events which took place in about the middle of February, the short position being that an arrangement was reached between the parties by their respective agents dealing with the problem which had arisen in relation to the shortfall in rent. That arrangement which was reached between the parties was summarised in the letter from Davis Breene Conti to Metro Commercial Property of 13 February 2004 and is conveniently summarised in the affidavit of Mr Braune, paragraph 14. The arrangement was that the rent due on 1 February not having been paid and the defendant having re-entered the premises and taken possession thereof, the defendant consented to the plaintiff resuming occupation of the premises on these conditions:

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(ii) a further bank cheque for a sum equal to two months' rent by 3.00 p.m. on 20 February 2004." 60 It is common ground at the bar table, and, hence, unnecessary for me to go to evidence in this respect, that what occurred was that on 13 February the lessee paid the whole of the February rent and also rent for the month of March and was to have paid on 20 February rent for the months of April and May but only paid rent for the month of April. 61 I have already referred to the plaintiff giving to the defendant the notice purporting to exercise its option to renew on 25 March 2004 and to the 133E notice purported to be served on 6 April 2004. 62 It is necessary to also refer to the 11 May 2004 service by the defendant on the plaintiff of a notice to quit requiring the plaintiff to leave the premises by 30 June 2004. On 6 May 2004 a full month's rent was paid. 63 The further matters to be taken into account include Mr Gray of counsel yesterday afternoon having made clear to the court that as at the time he was addressing, no rental instalment for the month of June 2004 had been paid. The court has been informed by counsel and proceeds upon the basis that Mr Gray, having at the bar table telegraphed his instructions that his client intended to serve yet a further section 133E notice in respect of the outstanding June rental instalment, late yesterday by bank telegraphic transfer, the lessee paid the month's rent. At some stage last night the further section 133E notice was served. These are matters which have come forward from counsel at the bar table. 64 There was at a particular point in time, certainly seen by the court to be efficient, a procedure whereby the court should presently determine the whole of the proceedings, including embracing on some basis the new 133E notice. However, at the commencement of the hearing today, counsel for the lessee made clear that his instructions were that his client wished to avail itself of its full entitlement under the statutory provision, which meant that it was impossible for the court to embrace within the ambit of the present hearing questions which may arise in relation to the subsequent notice. Returning to the relief sought 65 Effectively, the court having now determined the so-called preliminary questions in a manner adverse to the plaintiff, the central focus is on whether or not the plaintiff in the proper exercise of the court's discretion, has made a case for relief pursuant to section 133F. In that regard the section, as will be seen, permits the court to take into account a wide range of facts, matters and circumstances, including particularly any circumstances other than those set out in section 133F(3)(a) to (e) considered by the court to be relevant. 66 I have found this a particularly difficult exercise of discretion to adjudicate, and, for these reasons. · It is tolerably clear from the evidence before the court that during the whole of the period of difficulty, running, as I have said, for a goodly part of the period when the current lessee has been the lessee, the lessee has been in default in terms of failing to pay the monthly instalments upon the due dates. · The problems which appear to have beset the lessee in terms of its inability to comply with the lease in that regard have been exposed on the evidence to a certain extent. · The lessor has seen fit during the period between September 2003 and recent months, on each occasion when there has been further default by this lessee to proceed to deal with the lessee. 67 The evidence as to the difficulties which the lessee has had in terms of being in a position to pay rent on time centres upon:

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(2) construction works in progress from January 2004 in the area in Kings Cross surrounding the Venus Room, being council works on roads and footpaths. 68 Mr Innes has given evidence that by reason of those works he has observed that there is a substantial decrease in passing pedestrian traffic, which has resulted in an overall decrease in the takings of the Venus Room. He has deposed that the construction works in Roslyn Street, Kings Cross, were intended to have been completed by mid-April 2004 but are ongoing. His evidence has been that there had been a 33½ per cent drop in takings caused by these council works. 69 Notwithstanding that evidence and notwithstanding the pleas of the lessee seeking to pray in aid these difficulties with arrangements made with Mr Bray and the council, I am satisfied that there have been and continue to be grave difficulties in terms of this particular lessee being shown to be in a financial position to discharge its obligations to the lessor. 70 Mr Gray of counsel has cross-examined Mr Innes and established through that cross-examination that there have been a series of occasions when cheques drawn on the lessee's bank account have been dishonoured and where banks have charged what is called an 'honour fee', which is a fee where a cheque has been honoured albeit a particular account has been overdrawn; occasions when cheques have been drawn and dishonoured, including 23 June 2003, 27 June 2003, an honour fee being charged on 30 June 2003, an honour fee being charged on 21 July 2003, a dishonour on 31 July 2003, possible dishonours on 20 August 2003 and 26 August 2003, a dishonour on 23 September 2003, a 2 October 2003 dishonour, a 3 October 2003 dishonour and a 30 January 2004 dishonour. 71 The further evidence elicited under cross-examination from Mr Innes is that there has been no injection of capital into the lessee during the whole of 2004 or, as I understood it, any attempt to obtain additional equity capital at all. Further, and of particular concern, is the fact that the lessee company has never produced financial statements and, albeit trading just over two to three years, has never prepared tax returns. Further, for the whole of its occupation of the property, the occasions when it has paid rent on the due dates are perilously few. 72 Mr Gray has forcefully submitted to the court that the court should on the evidence accept that if the past be any indicator of the future, the prospects of the lessee having a change in fortune are so dismal in this case that the proper exercise of the court's discretion is to dismiss the 133F application. 73 The court's concern in terms of the proper exercise of the discretion in weighing up the respective cases, include a concern with the expenditure of some $400,000 by the plaintiff following its acquisition of the business from Panvena in terms of the fit-out of the premises. It is fair to say that at the end of his submissions, Mr Gray, speaking for his client, conceded that the defendant would submit to any order that the court thought just to the effect that it would purchase from the plaintiff all of the plaintiff's plant, fixture and fittings which the plaintiff would leave in the premises at the expiration of the lease [at whatever figure the court thought just or as determined by any reputable valuer nominated by the court]. This is however unlikely to amount to a substantial figure. 74 To the extent that it is possible, on the evidence adduced, to reach inferences as to the likely future in terms of the so-called contractual arrangements with Mr Bray, my own view is that there is little substance in any suggestion that that possibility will be furthered. 75 Ultimately however, one needs to weigh in the equation the fact that the court is certainly accepting of the proposition that the Kings Cross works may presently be playing, or have in the past few months, played a real part in the problems which the lessee has faced. Even so it is difficult for the court to accept that even without the Kings Cross works, the problems which have been raising their head so frequently in the second half of 2003 would not likely have continued to raise themselves anyway. 76 Ultimately, having taken all of these matters into consideration, it does seem to me that this particular lessee, which it seems to me has come within a straw of having lost the present application, should be given one-only last chance. The proper exercise of the court's discretion is to grant the section 133F relief but making very plain to the lessee the fact that [albeit that any application in the future will obviously be determined on its merits by the court] this will likely be the last time that this lessee will ever survive in terms of being in a position to continue as lessee should it again default or be late in its instalments of rental. 77 The sorry history which is reflected in the last several months bespeaks some form or degree of disorganisation in terms of responsibility in terms of this particular lessee. To my mind, there is however very great significance to be attached to the $400,000 payment, which is a considerable sum in terms of the refurbishment of the premises. There is also considerable significance to be attached, as I said in commencement, to the track record of this particular lessee, at least up to the particular types of problem which have been outlined had arisen from about August or September 2003. As I have said, one is looking at a period of some 32 months having expired, these particular problems having raised themselves in probably the last nine or 10 months. 78 Those are the two factors which have weighed most heavily. But I say again for the benefit of the lessee and for the assistance of any court which may later have to come to deal with a similar application that to my mind there has been but a straw as between the court exercising the relevant discretion here by refusing the section 133F relief and the decision to allow the application in terms of a "one last chance" approach. 79 There would need, it seems to me [albeit that the merits of any further applications will always have to be determined] some exceptional event to permit this tenant to survive yet another single occasion of a breach of the terms of the lease. 80 For those reasons, the court has ultimately determined that the proper exercise of the court's discretion on a 'one-last-only-chance basis' is as I have indicated.

Nameless, Shameless and Legless Pty Limited v 2 Roslyn Street Pty Limited

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Judgment (51 paragraphs)

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