Plaintiff v Defendants

Ms S L Marks SC; Mr P R Best with Mr T D Best and Mr M J Stirling

1 The Great Southern Group collapsed in May 2009. On 16 May 2009 the directors of the various entities in the Group, including the first defendant, Great Southern Property Holdings Ltd (Receivers and Managers Appointed) (In liq) (GSPH); the sixth defendant, Great Southern Land Holdings Pty Ltd (Receivers and Managers Appointed) (In liq) (GSLH); and the seventh defendant, Great Southern Property Managers Ltd (Receivers and Managers Appointed) (In liq) (GSPM) appointed joint and several voluntary administrators.

2 On 18 May 2009, ANZ Fiduciary Services Pty Ltd, in its capacity as security trustee for Australia & New Zealand Banking Group Ltd, the Commonwealth Bank of Australia Ltd, Mizhuo Corporate Bank Ltd and the Bank of Western Australia Ltd, referred to as the Club Banks, appointed the second defendant, James Gerard Thackray, the third defendant, Colin McIntosh Nicol, the fourth defendant, Anthony Gregory McGrath and Simon Andrew Read as joint and several receivers and managers of 10 companies within the Group, including GSPH, GSLH, GSPM and Great Southern Managers Australia Ltd (Receivers and Managers Appointed) (In liq) (GSMA).

3 GSMA was the Responsible Entity for 40 agribusiness managed investment schemes operated by the Group. One such scheme was the Great Southern Plantations 2007 Project. I will refer to that project as the 2007 Scheme. GSMA is not a party to this proceeding.

4 Mr Read retired as a receiver in July 2010 and the fifth defendant, Shaun Robert Fraser, and sixth defendant, Murray Campbell Smith were appointed in his place. At the time the receivers were appointed, the Group was jointly and severally liable to the Club Banks for approximately $380 million, plus interest. The charge under which the receivers were appointed secured assets of GSMA, other than assets of the managed investment schemes for which it was Responsible Entity.

5 The 2007 Scheme had been registered with the Australian Securities & Investment Commission on 8 March 2007, at which time GSMA was appointed Responsible Entity. To facilitate its schemes, GSMA acquired rights to land and granted sub-rights to investors, known as growers, over 'woodlots' which were to become scheme plantations. The land was located in Albany and Bunbury, Western Australia; the Gippsland region of Victoria; the Green Triangle in Victoria and South East South Australia; Kangaroo Island; the Tiwi Islands in the Northern Territory; and in Tasmania. The scheme land comprised 9,403 hectares of land owned by GSPH, GSLH and GSPM. I will refer hereafter to those entities as the landlords. An additional 5,991 hectares of land was owned by third parties. All of the scheme land was leased by GSMA from the landlords and third parties, save for the land in Tasmania, where the landlord purported to grant rights under the Forestry Rights Registration Act 1990 (Tas), instead of a lease. I will refer hereafter to GSMA as the tenant. Attached is a spreadsheet marked as Annexure B which describes each property, its location, title details, date of lease or forestry agreement and date of registration. The attachment was Annexure B to the affidavit of James Gerard Thackray, affirmed 11 March 2011.

6 There were approximately 4000 investors in the scheme. The land employed in the 2007 Scheme was divided into 43,989 woodlots of approximately one third of a hectare each. The investors had, by May 2009, invested approximately $132 million in pursuit of the objects of the scheme. The relationship between the tenant, as Responsible Entity of the 2007 Scheme, and the investors was defined by a Product Disclosure Statement, a scheme constitution, the terms of each sub-lease or sub-licence, and a management agreement pursuant to which each grower engaged the tenant to prepare, establish, maintain and ultimately harvest trees.

7 Following the collapse of the Group the tenant was unable to continue to perform its management functions, which included an obligation under each lease and forestry agreement, to 'tend and maintain the Plantation Crop in a proper and skilful manner and in accordance with sound silvicultural and environmental practices adopted within the forestry industry'.[1] It was insolvent, and in the absence of an injection of funds, did not have the money to discharge its obligations. Limited protective maintenance was carried out by the receivers for a limited time.

8 Commencing on about 28 April 2010, the landlords, whose assets were under the control of the receivers, commenced to serve notices of default on the tenant alleging a breach of cl 6(b), and in one case, a breach of cl 6(f) of most leases and forestry agreements. Most notices of default were dated and served on 28 April 2010. Others were served later. The last notice was dated 12 August 2010.

9 The notices of default uniformly required remediation of the alleged breaches within 30 days. In addition to alleging a breach of cl 6(b), each notice gave particulars of the breach, by stating the respect in which the tenants failure to perform its management obligations required remediation. For example, some notices alleged a failure to fertilise plantations or to control weeds. The particulars of breach were prepared by the receivers after having received advice from a team of foresters employed to report on the condition of each plantation.

10 Prior to the preparation and service of the notices of default, the receivers formally ceded to the liquidators of the tenant, control over the assets of the tenant as Responsible Entity, including the leases and forestry agreements. Consequently, the notices of default were served by the receivers on the liquidators.

11 Following service of the notices of default, the tenant took no steps to recommence management of the plantations, or to remedy any particular breach, or to make application for relief against forfeiture. The notices of default required payment of compensation. None was offered or paid.

12 At various times after service of the notices of default, the landlords served notices of termination or re-entry. The shortest period was one month and two days, although in some instances the time between service of the notice of default and the notice of termination was nearly two months. Attached is a spreadsheet marked as Annexure C, which describes the date of each notice of default and date of each notice of termination or re-entry. The attachment was Annexure C to Mr Thackray's affidavit.

13 A threshold issue in this proceeding was the validity of the purported termination of 31 leases of property in Victoria, South Australia, and Western Australia, and three forestry agreements in Tasmania. Most of the land rights granted in Victoria, South Australia and Tasmania, were granted by GSPH. The relevant rights in Western Australia were granted by GSLH and GSPM. There was one instance where a lease was granted in South Australia by GSPM. Attached is a spread sheet marked as Annexure D, describing the particulars of the breach relied upon by the landlords. The attachment was Annexure D to the affidavit of Mr Thackray.

14 On 17 December 2010, the landlords exchanged contracts of sale of the land with a third party purchaser. The plaintiff, Primary RE Limited, is the new Responsible Entity for the 2007 Scheme, having been appointed to replace the tenant on 24 December 2010. Primary challenged the validity of the notices of default and terminations by alleging that the management obligations in each lease and forestry agreement were ambiguous or uncertain; that the recitation of the breach in each notice of default was inadequate; that the notices did not allow reasonable time to remedy the breaches, or between service of the notices and termination, that the notices failed to specify compensation.

15 This dispute does not concern all land employed by the tenant for the purpose of the 2007 Scheme. The third party leases were disclaimed by the liquidators. Primary did not challenge some terminations, because it does not wish to include those properties within its restructured 2007 Scheme. Some of the leased land was used for more than one scheme. The relevant leases were in Western Australia and South Australia, and are referred to as 'multi-scheme leases'.

16 When this proceeding was commenced, Primary challenged service of the notices of default. That challenge is no longer pressed, but Primary submitted that the notices of default were required by statute to have been served on each investor, as a sub-lessee or sub-licensee. The notices were not served on the investors. Primary sought relief from forfeiture in the event the court determined that the leases, or any of them, had been forfeited. Primary sought to secure its interest in each lease and forestry agreement by lodging a caveat on title asserting an equitable interest as lessee. The landlords sought orders removing the caveats, for possession and for damages for breach of the leases and forestry agreements.

17 The issues for determination were substantially agreed. There were only slight variations between the formulation by the landlords and Primary. The issues distil to the following questions:

(1) Were the relevant provisions of each lease and forestry agreement, alleged by the landlords to have been breached by the tenant, too ambiguous and uncertain to be enforced?

(2) Does s 15 of the Conveyancing and Law of Property Act 1884 (Tas) apply to the Tasmanian forestry agreements?

(3) Did the notices of default comply with the requirements of s 146(1) of the Property Law Act 1958 (Vic) in respect of Victorian leases, and with the corresponding statutory provisions in respect of leases of land in other States.

(4) Were the notices of termination served by the landlords on the tenant effective to terminate the leases and forestry agreements.

(5) Does Primary have standing to make application under s 146(2) of the Property Law Act, and the corresponding provisions in each other State, for relief against forfeiture?

(6) If Primary has standing, should relief against forfeiture be granted and, if so, on what conditions?

18 There were numerous subsidiary questions which fall to be determined having regard to the way in which the landlords and the tenant advanced their respective cases. These included:

(1) Were the landlords required to prove each and every breach alleged in a notice of default and if so, had done so?

(2) Did the landlords' failure to serve the notices of default on each investor as sub-lease, invalidate termination?

(3) Did the specification of the breaches in each notice of default satisfied the requirements of a statutory notice under the relevant statutory provisions?

(4) Were the landlords required in each notice of default, to state an amount for compensation?

(5) Did the landlords allow a reasonable time for rectification of the alleged breaches?

(6) Was the tenant estopped from denying the validity of the notices of default and termination, and if so, was such estoppel binding on Primary?

(7) If Primary was entitled to make application for relief against forfeiture, could such an application be made in relation to a lease where only part of the land had been employed for the purpose of the 2007 Scheme? Such leases were referred to as the 'multi-scheme leases'.

(8) If Primary was entitled to make application for relief against forfeiture, was it liable to pay compensation or damages for the breaches by the tenant?

(9) To what extent could the landlords rely upon the acts and omissions of the tenant to resist a claim by Primary for relief against forfeiture.

19 The trial had initially been fixed on the basis that the issue for determination was the landlords' application for removal of the caveats. Because of the pending settlement of the land sale contracts, a trial of all issues became desirable. The time initially set aside for the trial was plainly inadequate, but with the cooperation of the parties, it was possible to complete the trial over four days. As a consequence, and without any criticism of counsel, I was required to explore 23 affidavits and exhibits, contained in more than 20 lever arch folders, without the usual assistance of counsel. That took time. The legal practitioners endeavoured to make the volume of material more manageable, by the preparation of an abridged Court Book, but as the issues expanded, and the trial progressed it became necessary to look beyond the selected material. Taking into account the affidavits, Court Books, and volumes of authorities, the material at trial exceeded 30 lever arch folders.

20 The parties were content to proceed on the basis of a sample lease and forestry agreement, which they agreed reflected the material provisions of all other leases and forestry right agreements. The sample lease commenced on 27 February 2008 for a period of 12 years. The subject land was in Victoria known as Browning. It had a plantable area of 184.2 hectares extending over three separate titles. The lease provided for a rental of $180 per hectare of plantable area, payable on the commencement date, and 2.5% of the Net Proceeds of Sale received by the Responsible Entity on behalf of the investors from the sale of harvested timber. Thus, the landlord's rent was dependent on the success or otherwise of the project resulting in harvest and sale.

21 Each lease and forestry agreement contained tenants or grantee covenants. The most relevant covenant was cl 6(b) which imposed on the tenant an obligation to:

Establish, tend and manage the Plantation Crop in a proper and skilful manner and in accordance with sound silvicultural and environmental practices adopted within the forestry industry and as and when appropriate prepare, cultivate, spray herbicides and insecticides, plan seedling trees, fertilise and Harvest the Plantation Crop.

In respect of one lease, a landlord relied upon a breach of cl 6(f) which required the tenant to:

Embark on such operations as may be required primarily and principally to prevent or combat land degradation in relation to the Plantable Area.

22 Each lease and forestry agreement contained an option to renew, exercisable by the tenant at least six months prior to the commencement of a further term of 12 years or less if specified in a notice. The right to renew could be exercised for all or part of the land specified in the notice.

23 Clause 13 of each lease and forestry agreement provided for termination in the event of default. The relevant clause in each lease provided,

(a) The Lessor will be entitled to terminate this Lease if:

(i) the Lessee fails or neglects to perform or observe any covenants, conditions or stipulations contained in this Lease; and

(ii) such default has continued for a period of 1 month,

after receipt by the Lessee of written notice from the Lessor specifying the default and requiring the default to be rectified.

(b) The Lessee will be entitled to terminate this Lease if:

(i) the Lessor is in default of any obligation under this Lease; and

(ii) such default has continued for a period of 1 month after receipt by the Lessor of written notice from the Lessee specifying the default and requesting that the default be remedied.

(c) Any termination of the rights of either Party pursuant to this clause will be without prejudice to any rights acquired by either Party pursuant to this Lease prior to termination.

24 Primary submitted that the use of the forestry agreements, as the mechanism to facilitate the planting, cultivation, management and harvest of trees on woodlots in Tasmania, was a device designed to circumvent a perceived prohibition on subdivision. It submitted that the forestry agreements should be treated as if a lease, amenable to the requirements of s 15 of the Conveyancing and Law of Property Act 1884 (Tas). That provision is in substantially the same form as like provisions in Victoria, South Australia and Western Australia, which impose preconditions to a landlord's right of forfeiture.

25 Some understanding of the events that occurred following the collapse of the Group is necessary to inform the resolution of allegations of waiver and estoppel, and Primary's application for relief against forfeiture. Set out below, generally in chronological order, are the most significant events and communications relied upon by one or other side in this dispute.

26 On 16 May 2009, when the lessors and the tenant were placed into voluntary external administration, Andrew John Saker was appointed administrator with Martin Bruce Jones, Darren Gordon Weaver and James Henry Stewart. On 18 May 2009 the receivers were appointed and assumed day-to-day control of the Group. On 19 November 2009 the tenant was placed into liquidation.

27 Shortly after their appointment, the receivers applied to this court for directions regarding the payment of insurance instalments due under insurance premium funding contracts in order to ensure that insurance coverage of scheme property was maintained for the benefit of investors. They notified investors, by a circular, dated 5 June 2009, that the tenant, as manager of each of the managed investment schemes, had insufficient funds available to meet all of the costs imposed on it in connection with the schemes. One purpose of the receivers' application to the court was to ensure that they had the right to indemnity from the assets of each relevant scheme for the costs incurred by them in protecting scheme assets.

28 On 2 July 2009, by a circular to investors, the receivers informed them that the tenant had no money with which to meet the day-to-day operating expenses of the schemes, but that the receivers had met certain of the expenses in order to preserve and protect the assets. That was described as a temporary measure. The receivers foreshadowed a recommendation that the schemes would be wound up or a new Responsible Entity appointed. At the same time the receivers published a 'scheme management plan' in which they described 'a scheme decision process' involving the establishment of a committee of stakeholders. They informed investors that unless a scheme was viable and solvent they would be recommending that it be wound up by resolution of investors or by order of the court, unless investors and a potential new Responsible Entity could reach agreement to restructure the scheme. It was in that context that Black Tree Pty Ltd contacted the receivers by letter dated 14 July 2009. Black Tree held itself out as a forestry management company. It has agreed to enter into a management agreement with Primary to manage the plantations to form part of a restructured 2007 Scheme.

29 By its letter dated 14 July 2009, Black Tree advanced a proposal to restructure certain managed investment schemes undertaken by the tenant as Responsible Entity. Black Tree expressed the belief that the forestry projects were solvent and viable as a whole but that the schemes would need restructuring. The Black Tree proposal had the following elements:

• To combine all existing forestry pulpwood projects into one pooled MIS project whereby existing Growers receive a share of the overall pooled project based on the current relative assessed valuation of their existing interest (taking into account the expected costs associated with managing their interest through to harvest);
• Growers agree that the costs of the RE of the new pooled project will be indemnified from the harvest proceeds of the pooled project, i.e. Black Tree plans to run the RE on a cost recovery basis only - providing maximum possible returns to the Growers;
• Should Growers wish to exit their investment rather than remain an investor in the pooled project, Growers will be offered the opportunity to sell their existing MIS interests for cash to a new strategic investor ('Plantation Investor');
• The Plantation Investor would also offer to buy GSL's other plantation assets including GSL's direct interest held in pulpwood forestry MIS projects and its interests in the 'ex-Hansol' plantations;
• All plantations would be managed by Black Tree on commercial arms length terms until completion of harvest. Black Tree would offer a significant proportion of existing GSL forestry staff employment to continue plantation management services; and
• It is planned to take the restructure proposal to meetings of MIS investors as soon as possible but only after extensive consultation with McGrathNicol and the recently formed Consultative Committee. In the meantime, if McGrathNicol is prepared to work exclusively with Black Tree to form and take a firm proposal to MIS Growers, Black Tree is prepared to indemnify McGrathNicol for all costs associated with the continued operation of the pulpwood forestry MIS projects.

30 On 13 August 2009, Primary Securities Limited had written to the receivers informing them that Primary made its service available as a Responsible Entity for companies wishing to operate or take over managed investment schemes. Primary said that it had a full list of the names and addresses of each grower in the relevant schemes and proposed to convene a meeting so that it could be appointed as the replacement Responsible Entity.

31 While the Club Banks provided some short term funding for maintenance, to care for and protect the forests, including those forming part of the 2007 Scheme, that funding did not continue. By September 2009 the Club Banks had informed the receivers that they were unwilling to provide funds to enable the tenant to continue to operate the schemes, and would only provide limited funding to maintain fire breaks and carry out other works required by insurers.

32 By a circular to investors dated 7 September 2009, the receivers confirmed that the tenant was insolvent and unable to meet its obligations as Responsible Entity. They also advised that the schemes required significant funding and were not viable under the existing scheme constitutions. They identified two possibilities - find a suitably qualified and capitalised replacement Responsible Entity, amend the scheme constitutions and make the scheme commercially attractive; or wind up the schemes consensually or by order of the court. The receivers stated that they were in discussions with several parties who had expressed interest in becoming a new RE, and had commenced a competitive process to generate offers for the assets.

33 On 18 September 2009 the receivers published a further circular to investors in which they advised of responses to their advertisement 'calling for expressions of interest in the assets of Great Southern and the role of RE for the Pulpwood Schemes'. The receivers noted that the secured creditors had provided substantial funding since their appointment, but had not assured them of further funding after 30 September 2009. They said that they were pursuing other potential sources of funding, but as yet had not been successful. The receivers said that 'if a potential RE cannot be identified by 30 September 2009 we may need to transition to the process of winding up of the Schemes'.

34 Following a national advertising campaign, seeking expressions of interest from parties to replace the tenant as Responsible Entity, proposals from Gunns Ltd, Pulpwood Plantations Pty Ltd and Black Tree Pty Ltd were received and considered by the receivers. The Gunns' proposal was the only one to proceed. There was no proposal for either the 2007 or the 2008 Schemes.

35 On 11 January 2010 the receivers published a further circular to investors in the 2007 Scheme. They advised that the purpose of the scheme could not be accomplished, and accordingly the scheme should be wound up. The circular informed investors of the identity of the landlords, and that the receivers did not have funding to meet the obligations of the tenant.

36 In a further circular dated 25 February 2010, the receivers notified the investors that they had caused the tenant, as Responsible Entity, to file the necessary documents with ASIC to commence winding up the schemes. The receivers had apparently sent a notice under s 601NC of the Corporations Act 2001 to investors informing them that the Responsible Entity considered the purpose of the scheme could not be accomplished. The receivers noted that the liquidators of the tenant had taken steps to disclaim leases from lessors of property owned outside the Group. They further advised that the tenant, as Responsible Entity, had no funds available to conduct critical maintenance of the plantations, and that while growers had been invited to contribute funds towards the maintenance of the plantations, no such funding had been forthcoming. They stated that the lack of maintenance meant that the Responsible Entity may be in breach of a number of covenants under the head leases and that, absent funding, they had not been able to ensure compliance with the terms of the head leases.

37 On 2 March 2010, ANZ Fiduciary Services amended the scope of the receivers' appointment by excluding certain property, including all rights, title and interest in and all rights of the Responsible Entity arising under each and every agreement, deed or document appointing it as Responsible Entity or manager of a managed investment scheme, including the 2007 Scheme. It is not entirely clear what motivated the variation. Primary submitted that it was done to facilitate the termination of the leases, by isolating the receivers from the obligations of the lessee. Whatever the motivation, the scope of the charge under which the receivers had been appointed no longer extended to the leases and forestry agreements, if it had ever done so. There was some debate as to whether the leases and forestry agreements were scheme assets. One apparent intention of the variation was to isolate the receivers from management obligations arising under the management agreements, and the leases, to perform work that might satisfy the lessees obligations under cll 6(b) and (f). The receivers notified the growers of the variation to the scope of their appointment by a circular dated 2 March 2010. They made reference to an earlier circular which foreshadowed the variation. The 2 March circular notified investors that they should expect a communication from the liquidators of the tenant.

38 In March 2010, Alan Leslie Hordacre, a qualified forester, who had been assistant general manager of the Forestry Division of Great Southern Ltd and, who had been responsible, along with other line managers employed by Great Southern, for the plantations that formed part of the 2007 Scheme, was instructed by the receivers to coordinate inspections of 22 properties that formed part of the 2007 Scheme. As a consequence, Mr Hordacre instructed Phillip Griffith, Morten Nilsson, Gerald Harvey and Simon Cook, all former regional managers of Great Southern, to visit each of the properties and complete an inspection report. Mr Hordacre inspected some of the properties himself, assisted by Bob Edwards, Regional Maintenance Manager, South Coast, for Great Southern. Mr Hordacre prepared his own reports, and reviewed those produced by others, making some minor amendments, before providing the reports to the receivers.

39 The reports constituted responses to questions framed by the receivers in the form of a check list. The check list was designed to identify the property, qualify the person making the inspection, and elicit information about the condition of the plantation. The information sought through the inspections concerned plantings, the general state of the trees and surrounding vegetation, potential fire hazards, the impact of surrounding vegetation on growth potential, the state of the plantations in comparison with 'standard silvicultural practices' for the region, the work required to make the plantation compliant, the likely cost of the work, and a raft of other information concerning thinning, fertilisation, insect, weed and disease control, erosion, and fencing. The inspections that were carried out elicited more detail in some categories than others. For example, the coppice thinning part of the report was, in most cases, not completed. That might be explained by the fact that at the time of the inspections the trees were less than two years old. Of particular importance to an issue in the proceeding was that part of each report that was used in the preparation of notices of default; and the extent to which those engaged in the process of inspection had applied a standard silvicultural practice for the region. The plaintiff contended that such a concept was so uncertain or indefinite as to render the obligation to maintain the land according to such practices, unenforceable.

40 Mr Thackray said that the reports prepared by those inspecting the properties were used in the preparation of notices of default. Some plantations were found not to have suffered adverse consequences from the tenant's failure to perform its management obligations. Curiously, in the case of those plantations, no default notice was issued, even though management had ceased. In some cases defaults were identified as time passed, because seasonable activity had not been performed. That explained the delay in issuing some notices of default.

41 The parties did not ask the court to examine each and every notice. Primary's statement of claim relied upon common features of each notice of default. The case proceeded on the basis of four sample notices of default, one each for Victoria and South Australia and two for Tasmania. The Victorian notice of default was in the following form and terms:

42 The notices of default were served by the landlords on the tenant on or about the date of each notice. The first batch was dated 28 April 2010. The liquidator of the tenant deposed that he received the notices of default and reviewed them. He did not dispute that the notices were properly served on the tenant. He acknowledged the tenant's management obligations and understood that the notices were served in relation to the tenant's failure to observe those covenants. Mr Saker deposed that at the time the notices of default were received, the tenant was insolvent and without any funds. It was not in a position to remedy the breaches. Mr Saker said that he had no intention of taking any step to remedy the breaches unless funding could be obtained from an interested party.

43 During the period May to July 2010, correspondence passed between Clarendon Lawyers and the receivers' solicitors, Minter Ellison. In some of the correspondence Clarendons requested that the landlords not terminate the leases. At that time Clarendons acted on behalf of 'Save my Trees'. Rob Burns was chairman. On 25 May 2010 Clarendons wrote to Minter Ellison informing them that Mr Burns had recently been approached by a commercial party who proposed that growers call a meeting for the purpose of replacing the Responsible Entity and to amend the constitution and underlying documents, to facilitate a recapitalisation of the projects and remedy any defaults under the head leases. The letter foreshadowed that if the leases were terminated the new Responsible Entity would make an application for relief against forfeiture. Clarendons sought an undertaking from the receivers not to terminate the head leases without providing 14 days notice of the proposed termination.

44 On 31 May 2010 Mr Saker wrote to Mr Burns, informing him that the liquidators were unable to maintain the properties or plantations in accordance with the terms of the leases due to a lack of funds. Attached to the letter, as Annexure A, was a list of plantations in respect of which default notices had issued. Mr Saker gave an estimate of the contributions that would be required of scheme members if the plantations were to be maintained to 30 June 2010. That estimate was $17.8 million. Mr Saker sought a response from Mr Burns' organisation as to whether it would consider providing funding to enable the various defaults to be remedied, and for on-going and future costs associated with keeping the leases on foot, and for an application for relief against forfeiture. Mr Saker noted that he had also written to the Bendigo and Adelaide Bank Ltd, because of its security interest in some of the investors' interests under the projects. He stressed the urgency of the matter and sought a response.

45 Mr Saker said that he received no response from Mr Burns, although he did have some telephone conversations at around that time with Mark Bland of Clarendon. Mr Bland told Mr Saker that he acted for 'Save my Trees', but that it did not have any funding to enable the defaults to be addressed, and that it was instead focussing on an attempt to change the Responsible Entity.

46 On 2 June 2010, Mr Saker arranged for copies of each default notice to be sent to Clarendons. This was done by means of a CD. Receipt of the CD was confirmed by email.

47 On 3 June 2010, Mr Saker wrote to the receivers advising that the liquidators had received an expression of interest for the replacement of the tenant as Responsible Entity and that it had been requested to provide information to assist in completing a due diligence of the project.

48 On 3 June 2010 Minter Ellison responded to Clarendon's letter of 25 May 2010, drawing attention to some background information, including the attempts by the receivers to seek expressions of interest from prospective parties willing to take on the role as Responsible Entity. Clarendons were reminded that when notices under s 601NC of the Corporations Act were issued to members, notifying them of the proposal to wind up the scheme, there had been no response, and that no meeting had been called within 28 days to consider the proposed winding up. As for the proposed replacement Responsible Entity, Minter Ellison said,

1. While the merits of any proposal to recapitalise the Schemes is an issue between growers and the proponent, we note the following:

(a) It is almost 9 months since the Receivers advertised the commencement of a process to find a suitably qualified and capitalised replacement responsible entity for the Schemes on 7 September 2009. No party saw merit in attempting a restructure.

(b) Any replacement responsible entity forming its won [sic] view as to the commercial opportunity for recapitalising the Schemes will need to reflect on the fact that some external leases were terminated many months ago, some internal head leases have already been terminated, almost all internal leases are in default, some areas have not been planted, and the economies of scale on managing the forestry estate as a whole no longer exist as a result of the fragmentation of responsibility of the schemes.

(c) To that end, any proponent should have regard to the solvency and viability reports that accompanied the Notices, which reports identified funding deficiencies of approximately $33 million and $20 million respectively across the life of the Schemes. This obviously assumed that all head leases continued and the Schemes were not restructured, but reflected the economies of scale achieved by Great Southern.

(d) The experience with convening meetings to replace GSMAL as responsible entity of other schemes suggests that the ability of proponents to requisition scheme meetings, put well formulated proposals to Growers and achieve the requisite majorities is challenging, to say the least.

(e) The interests of the Great Southern landlords and their creditors are not served by deferring termination where events of default exist, and waiting indefinitely for a proposal to be formulated, and approved, pending an application for relief from forfeiture. Nor is it incumbent on them to do so.

(f) If growers wish to prevent termination of the head leases, then in advance of a proposal to replace the current responsible entity, GSMAL should be put in funds to cure any curable events of default. This could be achieved in a far shorter period of time than the appointment of a replacement responsible entity in order to give effect to any desire on the part of the growers to remedy the defaults. If your clients wish to pursue this alternative you should speak to the liquidators of GSMAL.

(g) Our clients cannot draw any reasonable comfort as to the preservation of head leases until an enforceable undertaking is given by an entity of substance that relates to all property the subject of each internal head lease.

(h) Further, we do not understand why it is necessary for any relief from forfeiture application to await the proponent being appointed as the replacement responsible entity. GSMAL already has an existing ability to seek relief from forfeiture, as do Growers themselves.

(i) We presume that any proponent will have regard to the issue of whether members with forfeited woodlots (by reason of termination of head leases) are entitled to vote at meetings of growers, and if so, how their interests should be valued. You will recall that the Receivers obtained directions on these issues from the Supreme Court of Victoria.

(j) To the extent that a proponent is considering replacing GSMAL as RE in anticipation of realising value out of a sale of the land estate assets, they should note that while the Receivers currently propose to realise the land estate in due course, that sale may or may not involve the sale of timber in connection with the schemes in general or these Schemes in particular, and may not require a surrender of head leases and subleases for value. Further, the proponent should not assume that the Receivers are committed to realising all of the land estate in any sale.

49 While declining to give the required undertaking, the receivers confirmed their willingness to give Mr Burns not less than 14 days notice of their intention to execute a contract of sale in relation to any properties leased by the tenant. That undertaking was to expire on 31 August 2010.

50 On 8 June 2010, the receivers wrote to the liquidators requesting that the liquidators notify growers under the 2007 Scheme and another scheme that the tenant had not disputed the validity of the notices and had not sought to cure any of the continuing defaults. The receivers noted that the landlords were organising their affairs on the basis that following termination they would acquire an unencumbered title to the land. On 11 June 2010, the liquidators informed the receivers that the liquidators were without sufficient funds to provide growers with advice in relation to the notices of default. Interestingly, the liquidators said that as at the date of their letter, the tenant had not accepted the validity of the notices of default.

51 On 10 June 2010 the receivers announced to the Australian Stock Exchange that they would conduct a sale process for the entire Great Southern Blue Gum Forestry Estate.

52 Most notices of termination were served on 16 June 2010. They were in respect of the notices of default dated 28 April 2010. The remaining notices of termination were served on or about 21 June, 18 August and 20 September 2010.

53 On 17 June 2010 Minter Ellison responded to an email from Clarendons, dated 3 June 2010, in which Clarendons sought information upon which the receivers relied to prepare the notices of default. Minters responded:

Our clients have considered whether it is appropriate to refrain from issuing termination notices where the leases are in default and have not been cured during the notice period, based on the prospect that the defaults will be cured by a replacement responsible entity. However it is not reasonable for the Great Southern Land Owning Entities to desist from issuing notices in circumstances where, among other things:

1. the "relevant parties" are not prepared to be identified, and you do not claim to act for them;
2. there is no evidence that funding has been approved to enable a replacement responsible entity to convene meetings, and if successfully installed as the new responsible entity, remedy defaults;
3. no public company with an appropriate AFS licence has been identified that is willing to act as responsible entity;
4. there is no commitment to conduct due diligence and call meetings in a relevant timeframe;
5. there is no commitment to cure defaults on all leases; and
6. there is no detail as to the nature of any commercial restructure that a recapitalisation of the Schemes may involve, particularly where the economics of recapitalisation will be challenged by:

(a) the termination of leases by landlords other than the Great Southern Land Owning Entities, including Rural Funds Management Limited and the Tiwi Land Council;

(b) the fact that planting never occurred on some leases (particularly for the 2008 Renewable Fibre Project);

(c) the fracturing of responsibility for the Great Southern forestry schemes, which means economies of scale have been lost; and

(d) the uncertain attitude of growers to any proposal that may be submitted.

54 On 25 June 2010, Clarendons sought a broader undertaking from the receivers to afford their 'clients the necessary comfort not to seek injunctive relief against' the receivers in relation to 'any intention to enter into a contract, arrangement or understanding... to sell, encumber or otherwise dispose of any land which forms part of' the 2007 Scheme. Minter Ellison responded by letter dated 16 July 2010, confirming the undertaking that had been given, but declining the broader undertaking sought by Clarendons. That letter continued:

We refer to your letter dated 25 June 2010 and your request for a broader undertaking set out in your letter. We are instructed to decline your request for the broader undertaking but affirm that the existing undertaking continues to apply.

As you know, our clients are actively seeking to realise the land the subject of the security in favour of their appointer. If Project Investors (ie growers) wish to seek relief from forfeiture from the termination of head leases then they should promptly do so - they have had plenty of time to consider the commercial options.

Further, if there is a genuine party seeking to replace GSMAL as Responsible Entity of either or both of the Projects then that party should promptly seek relief from forfeiture.

We have not received any correspondence from either your firm or a third party suggesting that an interested third party actually proposes to replace GSMAL as Responsible Entity for the Projects. If you have more up to date information, please let us know.

More generally, it is not for our clients to guess what type of contracts, arrangements or understandings come within the scope of the proposed undertaking sought and, frankly, we do not understand:

• How paragraphs (b) to (e) of your proposed undertaking add to the protection offered by our clients' undertaking; or
• What types of contracts would be within paragraphs (b) to (e) that are not already within the scope of our clients' more limited undertaking.

55 On 28 June the liquidators placed on their website a circular to growers in the 2007 Scheme. In that circular the liquidators stated that the landlords had served notices of default on the tenant, but that the tenant was unable to remedy the defaults without funding. The liquidators noted that they were not required to incur any expense in relation to the winding up unless there was sufficient available property but went on,

Notwithstanding that the Liquidators have no obligation to do so, with a view to exploring all opportunities, we have corresponded with both Save our Trees and Bendigo and Adelaide Bank Ltd, as interested parties, to ascertain their interest in either replacing GSMAL as Responsible Entity or providing funding to remedy the defaults on the various leases.

We advise that an independent party (the Party) has recently expressed an interest in continuing the Project as a Replacement Entity. The party is currently conducting its due diligence and is evaluating the options available to finance the costs involved with remedying the defaults and continuing the Project.

Please be advised that if funding is not available to GSMAL, or a replacement Responsible Entity is not installed, the Liquidators will have no ability to defend the termination notices which have now been received in relation to the relevant leases. The termination of the leases may result in the Growers Rights in relation to the woodlots being extinguished.

Mr Saker deposed that there was no response from growers to the circular.

56 On 27 October 2010, Minter Ellison wrote to Clarendons advising that ANZ Fiduciary Services claimed a security interest over the interest of the tenant in the leases. They submitted that the leases were not 'scheme property' and thus fell within the scope of the charge.

57 On 13 September 2010, the investors in the 2007 Scheme called a meeting of members to consider resolutions to replace the tenant with Primary as the new Responsible Entity, and the engagement by Primary of Black Tree as manager of the plantations. The proposed resolutions also dealt with fundraising and proposals for the reinstatement of leases that had been terminated. The proposal foreshadowed applications for relief against forfeiture which might be made by Primary once appointed Responsible Entity. By letter dated 22 September 2010 the receivers, through their solicitors, responded with a lengthy letter noting what they regarded as shortcomings in the proposals and seeking to persuade Clarendons of their futility.

58 On 17 December 2010, the receivers advised the tenant, Primary and others that it had exchanged contracts in relation to the sale of the Great Southern Forestry Estate and the water rights, which included the freehold land. The letter concluded:

In relation to the 2007 Plantation and the 2008 renewable Fibre Projects, freehold interests in land are being sold on an unencumbered basis where a head lease has been terminated and removed from title.

59 On 22 December 2010 members of the 2007 Scheme passed resolutions removing the tenant as Responsible Entity and appointing Primary in its place. Primary's appointment was recorded by ASIC on 24 December 2010. Primary has indicated its intention to formally appoint Black Tree as the manager of the 2007 Scheme. Following its appointment as Responsible Entity of the 2007 Scheme, Primary commenced raising funds from growers by issuing grower invoices for the payment of up front management fees.

60 On 24 December 2010, Primary filed a generally endorsed writ in this court in which it sought declarations that the notices of default were invalid, that the notices of termination were ineffective, and that the leases remained valid and enforceable. In the alternative, Primary sought relief against forfeiture. That proceeding was not immediately served. The receivers were advised of the writ, and that Primary proposed to make similar applications in South Australia, Tasmania and Western Australia. There were negotiations between Primary and the receivers leading to an agreement on 10 January 2011, under which the receivers agreed that they would not complete any of the contracts of sale prior to 4 pm on Wednesday, 19 January 2011. Primary agreed that it would not serve the writ or writs, or register any caveat against any of the titles subject to the leases. Conditions of the 'standstill agreement' included access by Primary and Black Tree to the properties and access to such information that the receivers had concerning the condition of the plantations. Also on 10 January 2001, Primary confirmed that it did not intend to pursue properties located on Kangaroo Island, and that no caveats had yet been lodged.

61 On 11 January 2011, the receivers provided Primary with a significant amount of information relating to the properties including copy leases, copies of the notices of default and termination notices, operational maps of the properties, copy certificates of title, scheme information and correspondence with investors.

62 On 14 January 2011, Primary sought an extension of the deadline for compliance with a condition requiring it to advise the receivers of the land that would be part of the continuing scheme.

63 On 17 January 2011, Primary notified the receivers of the properties they wished to retain, and those that would not be retained. Of the 2007 Scheme land that had been leased by the tenant from the landlords, Primary sought to retain only 36 properties, and abandoned 14.

64 On 19 January 2011, Clarendons, then acting on behalf of Primary, sought a further extension of the standstill agreement for five business days, making lengthy submissions to Minter Ellison concerning insufficient particularity of alleged breaches, insufficient particularity of required compensation, inadequate time to remedy breaches and the uncertainty of the obligation in cl 6(b) of each lease.

65 The standstill agreement was not extended beyond 19 January 2011, and on the same day Primary prepared and lodged caveats over the leased land in Victoria claiming an equitable lease between the landlord, GS Property Holdings, and the tenant. Primary relied on the provisions of s 601FS and s 601 FT of the Corporations Act to assert its entitlement to make the claim in place of the tenant. As a consequence, GS Property Holdings commenced a proceeding by originating motion against Primary, under s 90(3) of the Transfer of Land Act 1958 (Vic), for removal of the caveats. That proceeding has been overtaken by this proceeding, commenced by Primary, in which relief is sought in respect of all of the land sought to be retained by Primary as part of a reconstituted scheme.

66 By 20 February 2011, Primary had raised some funds, by requiring the payment of up front management fees, from around 1,100 investors. It was also actively seeking additional funding from a 'rights issue' to existing investors who could thereby increase their investment in the 2007 Scheme. The offer was to be made in respect of woodlots that had presumably been abandoned by investors who did not wish to participate in a restructured scheme. In addition to the rights issue, Primary was in negotiations with the Bendigo and Adelaide Bank for a working capital facility of up to $5 million. Primary stated that it did not propose to undertake any forestry expenditure until there was a definitive decision in relation to its right to the land the subject of this proceeding.

67 Primary alleged that cll 6(b) and (f) of each of the leases and forestry agreements was too ambiguous and uncertain to be enforced. That submission overlapped substantially with its corresponding submission that reliance on those clauses, in notices of default, was too vague and imprecise, thus invalidating the notices.

68 To support its contention, Primary relied on the judgment of Kirby P (as he then was) in Biotechnology Australia Pty Ltd v Pace.[2] That was a case in which a research scientist had entered into a contract of employment on the basis of a letter of offer which provided:

I confirm a salary package of $A36,000 per annum, a fully maintained company car and the option to participate in the "Company's senior staff equity sharing scheme" at a time when it was known that no such scheme had been established by the employer. At the time of termination of employment no such scheme had been established.

In the High Court of Australia, Taylor and Owen JJ sought to explain the distinction between terms which are illusory and those which are real but uncertain. They do so in their joint judgment in Placer Development Ltd v The Commonwealth [1969] HCA 29; (1969) 121 CLR 353 at 359-360:

"... a promise to pay an unspecified amount of money is not enforceable where it expressly appears that the amount to be paid is to rest in the discretion of the promisor and the deficiency is not remedied by a subsequent provision that the promisor will, in this discretion, fix the amount of the payment. Promises of this character are treated by Pollock (Principles of Contract, 12th ed (1946) pp 38, 39) not as vague and uncertain promises - for their meaning is only too clear - but as illusory promises [...]."

Accepting, therefore, the distinction (but acknowledging that, at the margins, there will be legitimate differences of view about the legal classification to be applied in the particular case), the following general observations may be made about the task of classification required in cases of this sort:

1. The determination of every case depends upon its own facts. The meaning of the agreement between the parties must be discovered objectively. Where there is suggested ambiguity or vagueness or where it is urged that a term is illusory, it may sometimes be both necessary and appropriate to have regard to extrinsic evidence in order to give meaning to that to which the parties have agreed: see, eg, Kell v Harris (1915) 15 SR (NSW) 473 at 479; 32 WN (NSW) 133 at 136 and Raffles v Wichelhaus [1864] EngR 150; (1864) 2 H & C 906; 159 ER 375.
2. The court will endeavour to uphold the validity of the agreement between the parties: see Hillas & Co Ltd v Arcos Ltd. The court will attempt to avoid frustrating the wishes of the contracting parties so far as those wishes may be ascertained from the agreement between them: see Meehan (at 589); see also Barwick CJ in Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429 at 437 where his Honour said that: "... In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements."
3. But the court will not do so, where, in effect, it is asked to spell out, to an unacceptable extent, that to which the parties have themselves failed to agree. Nor will the court clarify that which is irremediably obscure. Most particularly, the court will not accept for itself a discretion which the parties have, by their agreement, reserved to one or other of them. To do so would not be to effect the contract but to change it: Kofi-Sunkersette Obu v A Strauss & Co Ltd [1951] AC 243 at 250 (PC).
4. Views will differ about the classification of the challenged provision and whether the court can or cannot give effect to it. Usually, there is no objectively right decision in these cases. That fact is illustrated by the frequency with which there are strongly expressed differences of judicial opinion concerning whether the case falls on one side of the line or the other. So it was in Placer Development where Kitto, Taylor and Owen JJ found that a clause in an agreement with the Commonwealth relating to a conditional entitlement to a subsidy was unenforceable. Menzies and Windeyer JJ dissented. Likewise in this case, Hope JA and Allen J have reached their respective views that the clause fell on one side of the line. Respectfully, I differ and agree with McHugh JA.
5. Nevertheless, the differences of result are not simply the result of differing judicial opinion based on nothing more than personal predilection. True, it is possible that behind the willingness of courts to fashion with precision a term which the parties have failed or neglected to clarify could be analysed in terms of differing fundamental attitudes concerning the role of courts in disturbing the economic relations of contracting parties. I say no more of that. Alternatively, it has been suggested that the willingness of courts to give content to the expression "subject to finance" in land title conveyancing transactions derives from the special nature of such transactions. In them, judges, familiar with the incidents of such contracts, feel confident that they can fill the gaps which the parties have left. In other cases, less familiar, they do not: see, eg, the comment by Professor K C T Sutton,"Certainty of Contract" (1977) 7 Qld Law Soc J 5 at 11. However that may be, the court will pay regard to features of the agreement, of the relationship between the parties and of relevant external reference points in order to determine whether the term which is challenged can or can not be sustained.
6. Matters which have been considered relevant in the determination of these cases include the following:

(a) The provision in question, although an essential term, may be left in adequately clear terms to be settled by an identified third party who is given power to settle ambiguities and uncertainties: see, eg, Foster v Wheeler (1888) 38 Ch D 130 and Axelsen v O'Brien [1949] HCA 18; (1949) 80 CLR 219.

(b) But even then, if the term is so vital that leaving it to one only of the parties unacceptably removes certainty in the arrangement, the court may or may not refuse to enforce it as illusory or unacceptably uncertain: contrast, eg, May and Butcher Ltd v The King [1934] 2 KB 17(n) and the comment of Gibbs J in Godecke v Kirwan [1973] HCA 38; (1973) 129 CLR 629 at 646-647.

(c) Where there is a readily ascertainable external standard which is proved, the court will have regard to it in order to add flesh to the provision which, on its own, is unacceptably vague and uncertain or apparently illusory. This is what happened in Sweet & Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699: see also Meehan v Jones (at 589).

(d) Where a contract provides a term containing a specified range of possibilities, a court, rather than avoiding the contract will hold the party to providing at least the minimum provision in the range, that is to say the one which is the most favourable to it. This is what occurred in Lewandowski v Mead Carney-BCA Pty Ltd [1973] 2 NSWLR 640 at 643. The contract had provided for the payment of a salary in the range of $7,000 to $9,000 per annum. This Court (Jacobs P; Hardie and Bowen JJA concurring) held that the effect of the agreement between the parties was to prescribe the minimum of $7,000 so that the contract was not void for uncertainty.[3]

70 Primary submitted that cl 6(c) adopted an inappropriately vague and uncertain criterion of 'proper and skilful manner and in accordance with sound silvicultural and environmental practices adopted within the forestry industry'. It questioned what was 'proper'. Primary submitted that the clause assumed that there was not a specific practice of some foresters, but a general practice adopted within the forestry industry. It asked - What was that general practice? It questioned what were 'sound' silvicultural and environmental practices. It pointed out that the clause assumed there may be 'unsound' practices. Primary complained that in a context in which notices of default called upon the lessee to do something, the lessee was entitled to know what to do in order to remedy the default. Clause 6(f) attracted little attention. It was relied upon in only one notice.

71 The landlords alleged that cll 6(b) and (f) were not ambiguous or uncertain. They submitted that such contractual provisions may rely on external standards for meaning, including reasonable standards; as well as the understanding or practice of business people, to give content and meaning to what might otherwise appear vague or uncertain. They submitted that the court should have regard to such external standards to 'add flesh to the provision'.

72 The landlords submitted that there were well established external, reasonable standards to inform the phrase, 'in a proper and skilful manner'. They gave instances where similar words had been employed and had received implied judicial approval. Ultimately, Primary's complaint as to the ambiguity in or uncertainty of the expressions used in cll 6(b) and (f) of the leases was answered by its own expert forester, who, along with the landlords' witness, found no difficulty with the concepts.

73 The Great Southern Group, including the tenant as scheme manager, published and employed forestry operations manuals which prescribed the practices to be applied in the management of the plantations. These manuals dealt expressly with weed control, pest and disease control, nutrition, coppice management, and foliar sampling. They contained detailed instructions on methodology and standards. There were also industry codes. There was a Code of Practice for Timber Production published by the Victorian Government Department of Sustainability and Environment; Guidelines for Plantation Forestry in South Australia, published by the South Australia Department of Primary Industries and Resources; a Forest Practices Code, published by the Forest Practices Board, Tasmania; and a Western Australian Code, published by the Forest Industries Federation (WA) Inc.

74 It was difficult to ignore the obvious significance of the Great Southern operations manuals to the requirement for management in relation to the plantations, and thus performance by the tenant of its obligations under cll 6(b) and (f). The operations manuals contained standards expressly adopted within the Group - landlords and tenant. On 1 March 2011, Primary's expert forester, David Quill, wrote to Robert Garton Smith, Managing Director of Primary, following Mr Quill's review of reports prepared by an expert forester engaged by the receivers. Mr Quill's letter reflected the mutual admiration the experts on both sides had for one another, manifest throughout their evidence. Mr Quill made reference to 'best forest industry practice'. He had no difficulty explaining 'a normal silvicultural regime'. Other instances in which similar or like terms were employed were evident in the material. For example, in a Management Agreement proposed between Primary and Black Tree, the manager was required by Primary to carry out or cause to be carried out the Managers Services in accordance with 'sound silvicultural and environmental practices adopted within the forestry industry...'

75 I have no doubt that the expressions described by Primary as uncertain were expressions that were well understood by an informed independent bystander in the position of the landlords and the tenant, as having meaning, and capable of practical application. Expressions of the kind employed in cll 6(b) and (f) were, in my view, deliberately framed by the contracting parties to allow for advancements in science and technology; and to accommodate different growing conditions, as well as an indeterminate range of potential problems experienced in the agricultural undertaking. The kind of precision demanded by Primary was not only inconsistent with its own proposed relationship with Black Tree but, if implemented, would frustrate effective management through over prescription.

76 Primary alleged that prior to exercising a right of re-entry or forfeiture of any of the leases or forestry agreements, for breach of any covenant or condition in the lease (other than for non-payment of rent), the landlords were required to strictly comply with preconditions imposed by statute. In each case, the statutory regime required a notice to be given to the tenant specifying the particular breach complained of, and, if it was capable of remedy, providing the tenant with an opportunity to remedy the breach, and pay compensation. Primary submitted that the notice was required to provide the tenant with a reasonable time with which to remedy the breach and to make compensation; and that if compensation was sought, it must be specified.

77 Primary alleged that, in each case, the notices of default did not properly specify the breaches alleged, and failed to state what the lessor would accept as compensation, or to otherwise provide particulars of the compensation that would be accepted to avoid re-entry or forfeiture. It alleged that the time allowed before termination of the leases was unreasonably short. Primary alleged that the notices of default were invalid. It also alleged that the notices of default were required to be served on the investors, but were not. Primary alleged that because the landlord in each case had purported to exercise its right to terminate the lease without allowing a reasonable time to rectify the alleged breaches after service of the notices of default, the leases and forestry agreements had not been terminated.

78 The statutory requirements in each relevant State are essentially the same, although there exist minor differences, such as the minimum time in Victoria of 14 days to remedy a breach. Section 146(1) and (2) of the Property Law Act 1958 (Vic) provide:

1. Restrictions and relief against forfeiture of leases and under-leases

(1) A right of re-entry or forfeiture under any proviso or stipulation in a lease or otherwise arising by operation of law for a breach of any covenant or condition in the lease, including a breach amounting to repudiation, shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice -

(a) specifying the particular breach complained of; and

(b) if the breach is capable of remedy, requiring the lessee to remedy the breach; and

(c) in any case, requiring the lessee to make compensation in money for the breach -

and the lessee fails, within a reasonable time thereafter, or the time not being less than fourteen days fixed by the lease to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor, for the breach.

(1A) ...

(2) Where a lessor is proceeding, by action or otherwise, to enforce or has enforced without the aid of the Court or the County Court such a right of re-entry or forfeiture, the lessee may apply to the Court for relief; and the Court may grant or refuse relief, as the Court, having regard to the proceedings and conduct of the parties under the foregoing provisions of this section, and to all the other circumstances thinks fit; and in case of relief may grant it on such terms (if any) as to costs, expenses, damages, compensation, penalty or otherwise, including the granting of an injunction to restrain any like breach in the future, as the Court, in the circumstances of each case, thinks fit.

79 Sections 15(1) and (2) of the Conveyancing and Law of Property Act 1884 (Tas) provide,

1. Restrictions on and relief against forfeiture of leases

(1) A right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant or condition in the lease, shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice specifying the particular breach complained of and, if the breach is capable of remedy, requiring the lessee to remedy the breach, and in any case requiring the lessee to make compensation in money for the breach, and the lessee fails, within a reasonable time thereafter, to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor, for the breach.

(2) Where a lessor is proceeding, by action or otherwise, to enforce such a right of re-entry or forfeiture, the lessee may, in the lessor's action, if any, or in any action brought by himself, apply to the Court for relief; and the Court may grant or refuse relief as the Court, having regard to the proceedings and conduct of the parties under the foregoing provisions of this section, and to all the other circumstances, thinks fit; and in case of relief may grant it on such terms, if any, as to costs, expenses, damages, compensation, penalty, or otherwise, including the granting of an injunction to restrain any like breach in the future, as the Court, in the circumstances of each case, thinks fit.

80 The relevant provisions in Western Australia are to be found in s 81 of the Property Law Act 1969 (WA) which provides,

1. Restrictions and relief against forfeiture of leases and under-leases

(1) A right of re-entry or forfeiture under any provision or stipulation in a lease for a breach of any covenant or condition in the lease is not enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice -

(a) specifying the particular breach complained of;

(b) where the breach is capable of remedy, requiring the lessee to remedy the breach; and

(c) in any case, requiring the lessee to make compensation in money for the breach,

and the lessee fails, within a reasonable time after the service of the notice on him, to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor, for the breach.

(2) Where a lessor is proceeding, by action or otherwise, to enforce or has enforced without the aid of the Court such a right of re-entry or forfeiture, the lessee may, in the lessor's action (if any) or in any action brought by himself apply to the Court for relief, and the Court -

(a) may grant or refuse relief, as the Court having regard to the proceedings and conduct of the parties under the foregoing provisions of this section, and to all the other circumstances thinks fit; and

(b) in case of relief may grant it on such terms (if any) as to costs, expenses, damages, compensation, penalty or otherwise, including the granting of an injunction to restrain any like breach in the future, as the Court in the circumstances of each case, thinks fit.

81 Sections 10 and 11 of the Landlord and Tenant Act 1936 (SA) provide:

1. No re-entry till notice to tenant to remedy breach

A right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant or condition in the lease shall not be enforceable by action or otherwise, unless and until -

(a) the lessor serves on the lessee a notice specifying the particular breach complained of, and, if the breach is capable of remedy, requiring the lessee to remedy the breach, and in any case requiring the lessee to make compensation in money for the breach; and

(b) the lessee fails within a reasonable time thereafter to remedy the breach, if it

is capable of remedy, and to make reasonable compensation in money to the satisfaction of the lessor for the breach.

(1) Where a lessor is proceeding by action or otherwise to enforce such a right of re-entry or forfeiture the lessee may, in the lessor's action (if any), or in any action brought by himself, apply to the Supreme Court or a judge thereof for relief, and the court or judge may grant or refuse relief as such court or judge, having regard to the proceedings and conduct of the parties under the last preceding section and to all other circumstances, may think fit.

(2) If the court or judge grants relief it or he may grant it on such terms (if any) as to costs, expenses, damages, compensation, penalty, or otherwise, including the granting of an injunction to restrain any like breach in the future, as the court or judge in the circumstances of each case thinks fit.

82 Primary's submissions concerning the landlords' failure to comply with their statutory obligations for the termination of the leases may be summarised as follows:

(1) The statutory provisions applicable in each State are remedial in nature and should be construed as for the sole benefit of the lessee. The authorities relied upon by Primary to establish that the statutory requirements exist for the protection of tenants and to preclude forfeiture of a tenant's interest in property within the sphere of the section's operation except in accordance with its terms are usefully summarised in Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service;[4] Fletcher v Nokes;[5] Fox v Jolly;[6] Progressive Mailing House v Tabali;[7] World Best Holdings Ltd v Sarker.[8]

(2) Consequently, the provisions must be interpreted by reference to their remedial object and purpose.

(3) The parties to a lease may not contract out of the benefit conveyed on the lessee by the statutory provisions.[9]

(4) Strict compliance with the requirements for a statutory notice is a precondition to an effective forfeiture or re-entry.[10]

(5) The statutory notice provisions in each relevant jurisdiction include three broad elements:

(a) Where the lease and breaches within the sphere of its operation, the provisions require a compliant notice before termination.

(b) The notice must specify the particular breach complained of; and if the breach is capable of remedy, require the lessee to remedy the breach; and in any case, require the lessee to make compensation in money for the breach.

(c) That following the service of a compliant notice the landlord may only terminate the lease if a reasonable time has been given to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor.

(6) When drafting their notices, the lessors had failed to comply with their primary obligation to describe the particular acts or omissions of the alleged breach (and any demand for compensation) fairly, precisely and with such reasonable certainty that the lessee was not left in any doubt as to what was alleged against it and what was required to avoid forfeiture.[11]

(7) A notice of default must be particularised so that the lessee is informed of the 'particular condition of the premises which he was required to remedy'.[12]

(8) The lessor must draft the notice as if the lessee were an uninformed stranger. In other words, the lessor was not entitled to make assumptions as to the subjective knowledge of the lessee in order to remedy omissions in the notice.

(9) The statutory provisions required each lessor to serve compliant notices of default on each sub-lessee, or in the present cases, the growers.

83 Central to Primary's case for invalidity of the notices of default was its complaint about the adequacy of the notices to specify the breach and compensation. There were, of course, other substantive complaints, including failure to allow reasonable time for rectification and failure to serve the notices of default on sub-lessees.

84 Before approaching the questions concerning the adequacy of the notices of default, it is necessary to decide whether the forestry agreements are in a class of their own, terminable without regard to the pre-conditions imposed under s 15(1) of the Conveyancing and Law of Property Act 1884 (Tas).

85 Primary's case in relation to the forestry agreements depended upon it successfully characterising those agreements as leases amenable to the requirements of s 15(1) of the Tasmanian Act. That provision is in substantially the same form as s 14(1) of the Conveyancing and Law of Property Act 1881 (UK), which was the foundation for legislative regimes for the termination of leases in Victoria, South Australia, Western Australia and elsewhere.

86 The forestry agreements were recorded in a form of a statutory deed, registered with the Recorder of Titles in Tasmania as a Forestry Right Deed under the Forestry Rights Registration Act 1990 (Tas). The terms of each deed, or forestry agreement, were in material respects identical to the terms of each lease of land in Victoria, South Australia and Western Australia, save that the parties had been careful to craft the forestry agreement in the language of a grant of a Forestry Right.

87 Section 5(1) of the Forestry Rights Registration Act provides,

(1) A forestry right shall, notwithstanding any rule of law or equity to the contrary, be deemed to be a profit à prendre but shall not confer a right of exclusive possession of the land to which it relates.

88 Primary's case to have the forestry agreements construed as leases may be distilled into the contention that while the agreements were in form a grant of a profit à prendre, the form was a device to avoid the risk that a lease would be invalid or unenforceable. It submitted that the forestry agreements took their form because the landlords perceived that the grant of sub-leases to investors might have offended a prohibition on sub-division, contrary to s 81(1) of the Local Government (Building & Miscellaneous Provisions) Act 1993 (Tas).

89 Primary submitted that the rights granted under the forestry agreement may be a profit à prendre and a lease, granting exclusive possession. That was submitted notwithstanding the purport of the instrument creating a Forestry Right pursuant to s 5(2) of the Forestry Rights Registration Act and s 107 of the Land Titles Act 1980 (Tas). The rights were registered in the Tasmanian Land Titles Office. Primary did not allege that the Forestry Right Deed's were a sham. Rather, it sought to characterise the deeds as in substance leases, inviting the court to look past the 'label'.

90 Primary submitted that the question as to whether a lease had been created was a matter of law, determined by the construction of the document. That process, it submitted, ignored any subjective characterisation of the transaction by the parties. Primary relied on the decision of Windeyer J in Radaich v Smith[13] where his Honour said,

Whether when one man is allowed to enter upon the land of another pursuant to a contract he does so as licensee or as tenant must, it has been said, "be in the last resort a question of intention", per Lord Greene MR in Booker v Palmer (1942) 2 All ER 674, at p 676. But intention to do what? - Not to give the transaction one label rather than another. - Not to escape the legal consequences of one relationship by professing that it is another. Whether the transaction creates a lease or a licence depends upon intention, only in the sense that it depends upon the nature of the right which the parties intend the person entering upon the land shall have in relation to the land. When they have put their transaction in writing this intention is to be ascertained by seeing what, in accordance with ordinary principles of interpretation, are the rights that the instrument creates.

91 Primary pointed to various aspects of the forestry agreements which it submitted characterised them as leases. Principally, it relied on the grant of exclusive possession for a determinate period.[14] Primary submitted that the terms of the agreements were substantially identical to the terms of the leases. In particular, the right of the grantor to enter the land was restricted to the purpose of carrying out its duties. On the other hand, the grantor was required to allow the grantee and contractors and employees full and free access to the land. The grantee also had the right to lock gates. Another indicator, according to Primary, was the grantor's power to re-enter. It argued that the power of re-entry was a characteristic of a lease, not a profit à prendre. Another aspect of the forestry agreement which, Primary argued, pointed to its true character as a lease, was the covenant for quiet enjoyment given by the grantor. Other indicators included the right of assignment, the right to construct roads and tracks, a restriction on the grantor creating encumbrances ranking in priority to the grantee's interest, and the absence of any provision to the effect that the grantee does not have exclusive possession of the land.

92 A curious provision of the forestry agreement was the right of the grantee to lease the whole or any part of the forestry right without the prior consent of the grantor. That right formed part of a mutual covenant in cl 8. There is an identical provision in cl 8 of each lease. The covenants are not, however, identical. Apart from different descriptors, such as Deed, Landholder and Grantee, in lieu of Lease, Lessor and Lessee, there are other differences. For example, cl 8(m) conferred on the grantee the right to sever, take away and sell or otherwise use or dispose of as the grantee sees fit, any Wood. No corresponding provision is found in the lease.

93 Primary may well be correct in its submission that the restriction on subdivision, as an explanation for the use of the forestry right deed in lieu of a lease, was misconceived. That does not really take the argument very far. The true character of the rights granted under the deed depends upon the intention of the parties expressed in the document, after applying the ordinary principles of construction. While the parties chose to structure their relationship as the grant of a forestry right, the actual terms of the grant conferred on the tenant rights and obligations equivalent to those of a lessee. The deed is in all but form, a lease. I do not disregard the expressed intention of the parties to create a profit à prendre, but accept the submission of Primary that the terms of their agreement takes the rights of the grantee well beyond those of a mere profit à prendre. Thus, the forestry agreements are in substance leases, amenable to the requirements of s 15 of the Conveyancing and Law of Property Act 1884.

94 Primary submitted that the receivers had failed to discharge the onus of proving that each of the alleged breaches had occurred. The breaches are those alleged in the notices of default. The landlords appeared to accept the burden to prove the breaches relied upon, pointing to the unchallenged evidence of Mr Hordacre, contained in his 2010 inspection reports. Mr Quill, an expert called by Primary, provided a report dated 17 March 2011. In his report he responded to questions concerning an affidavit of Mr Hordacre, affirmed 10 March 2011, and his 2010 inspection reports. In his affidavit, Mr Hordacre had described his role as a forester with Great Southern, making reference to its forestry manuals. He produced extracts from the forestry manuals as well as his inspection reports. In his responding report, Mr Quill said,

The Hordacre affidavit and associated documents were reviewed and I believe that the practices conducted in the Hordacre affidavit complied with accepted industry standards as described in the Forestry Operations Manual excerpts and the Codes of Forest Practices of each of the States of South Australia, Western Australia, Victoria and Tasmania.

The forestry activities and practices described in the Hordacre affidavit are an excellent summary of the practices that were conducted by Great Southern Ltd forestry staff, and from my experience and contact with GSL staff when they were a functioning organisation, were at all times conducted with due regard to the appropriate Codes of Practice.

...

The inspection reports entitled Forestry Lease Status Checklist for McGrath/Nicol: Version 1 were comprised of six main headings. It covered general information, general health and state of the trees (including photographs) maintenance of surroundings including fire breaks, coppice thinning, insect, weed and disease control, and infrastructure.

The questions under each of the categories sought response not only with regard to statutory requirements, but also Code of Forest Practice. The questions under fertilisation, insect and disease control basically requested a subjective answer. I regard the total document as a meaningful and thorough checklist. The only reservation that I have in regard to this document is that it was presented to former staff members of GSL, and as such may well have resulted in a bias response, as the reporters were in effect, reporting on their own work.

96 The reservation mentioned by Mr Quill, if realised in the preparation of the 2010 inspection reports, would mean that Mr Hordacre tended to understate the problems with the various plantations. It is difficult to conceive of a more fulsome endorsement by one party's expert of the opposite party's expert report, on the condition of the plantations.

97 Primary submitted that the landlords' counterclaim imposed upon them a burden to prove every element of forfeiture. That would require the landlords to prove each breach and comply strictly with the obligations under s 146 of the Property Law Act 1958 and the corresponding provisions in South Australia, Western Australia and Tasmania. While accepting a burden of proof, the landlords submitted that it was a limited evidentiary burden. They submitted that, having established some evidence of breach, the evidentiary onus shifted to the plaintiff to establish, on the balance of probabilities, that no breach in fact had occurred.

98 The background to the proceeding and its form meant that the issues raised between the parties were not without complication. The significance of the landlords' applications under s 90(3) of the Transfer of Land Act had been overtaken by Primary's challenge to the validity of the notices, and its alternative claim to relief against forfeiture. The outcome of this proceeding will determine the sustainability of the caveats lodged by Primary. This proceeding was not conducted as if all Primary need do was to establish a proper basis to maintain the caveats until a final determination of its interest in the land. This is the trial of the validity of termination of the leases and forestry agreements and, if terminated, whether relief against forfeiture would be granted.

99 In their counterclaim, the landlords sought compensation or damages for breach. They rely upon their termination notices as effective. While the question of compensation or damages is not to be assessed at this time, if at all, the nature of the claims required the landlords to prove the breaches. Were this a proceeding only for relief against forfeiture, the landlord might not be required to strictly prove the breaches on the balance of probability. But where the nature and extent of the breaches is a matter to be brought into account in the exercise of discretion, or as to the cost or time required for remediation, or whose damages or compensation are claimed, proof according to the ordinary standard is required.

100 It should, however, be noted that Primary's case challenging validity of the notices did not in terms deny the breaches. It was a technical case in which Primary complained about the failure of the notices to strictly comply with the obligations under the relevant legislative schemes, and the invalidity of the purported terminations. Primary rightly accepted that it bore the burden to establish invalidity.

101 On 3 June 2010, Andrew Saker, one of the liquidators of the tenant, wrote to the receivers after having received an expression of interest from a party interested in replacing the tenant as Responsible Entity. He sought information including 'a break down of the leases currently in default and specific details as to the reasons why default notices were served...' There was no challenge by the liquidators to the validity of the notices of default, or perhaps more correctly, that the tenant was in default, although they reserved their position.

102 It seemed to be common ground that the plantations were not being managed and maintained at the time the notices issued. Management had ceased on the collapse of the Group. A property known as Gamble received special attention because the report prepared by Mr Hordacre and his team was endorsed with the words 'no breach'. That was a curious comment when the tenant was openly conceding, initially through the receivers and later the liquidators, that it was not in a position to perform its management obligations, and was not doing so.

103 There was evidence that when the notices of default commenced to issue on 28 April 2010, there were specific management tasks that should by then have been undertaken, but which had not been done. The fact remained, however, that with the collapse of the Group, and the insolvency of the tenant, nothing was being done to maintain the plantations, apart from limited essential protective work carried out by the receivers. The fact that some plantations had suffered some material adverse consequence, through lack of maintenance, did not in my view add to the breach. The unchallenged breach of the overarching obligation, to manage and maintain the plantations, became somehow lost, displaced by a desire on the part of the landlords to particularise the consequence of that failure for each property. In my view there was no need to go that far.

104 In my opinion the overarching breach, and its consequences on particular plantations, was proved by the landlords on the balance of probabilities.

105 A useful summary of legal principles applicable to the construction of the relevant statutory requirements, mentioned above, is to be found in the judgment of Hodgson JA in Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service.[15] All parties relied, to a greater or lesser extent, on some of the passages set out below. His Honour said:

1. The genesis of s 129 lies in s 14 of the Conveyancing and Law of Property Act 1881 (UK) (which was re-enacted as s 146 of the Law of Property Act 1925 (UK)). In New South Wales, the equivalent of s 129 was first enacted by the Forfeiture of Leases Act 1901. For present purposes, these provisions are substantially identical to s 129; the only relevant difference is that the UK provisions contain no standard form like that which was set out in the schedule to the Forfeiture of Leases Act (now Sch 6 to the Conveyancing Act). This difference should be borne in mind, but it does not follow that the English cases are of no assistance: Johnson v Senes & Berger (1961) 78 WN (NSW) 861 at 862-863.
2. The purpose of s 129 is to give the lessee an opportunity to remedy any alleged breaches before the lessor exercises its legal right of forfeiture: Fletcher v Nokes [1897] 1 Ch 271 at 274; Horsey Estate Ltd v Steiger [1899] 2 QB 79 at 91; Ex parte Dally-Watkins; Re Wilson (1956) 72 WN (NSW) 454 at 456.
3. In my opinion, a proper opportunity is not afforded unless the lessee is alerted to the particular breaches on which the lessor proposes to rely and what the lessor requires in order to bring about a position where termination would not occur.
4. The reported cases are concerned with notices issued pursuant to alleged breaches of covenants to repair. In Fletcher v Nokes, a notice was issued under s 14 of the Conveyancing and Law of Property Act 1881 in which the lessor alleged generally that the lessee had "broken the covenants for repairing the inside and outside" of the demised premises, and required the lessee to repair "in accordance with the said covenants". This notice was held insufficient because the lease was over six houses and the notice did not indicate in which of the houses the default was made. North J said (at 274):

I think the notice which is to be given under s 14 ought to be such a notice as will enable the tenant to understand with reasonable certainty what it is which he is required to do. I do not mean that the landlord need go through every room in a house and point out every defect. But the notice ought to be so distinct as to direct the attention of the tenant to the particular things of which the landlord complains, so that the tenant may have an opportunity of remedying them before an action to enforce a forfeiture of the lease is brought against him. In my opinion, the notice which the plaintiff has given to the defendant is not sufficiently specific. Sect. 14 says that it is to be a notice "specifying the particular breach complained of." I do not think that is met by a notice which simply says, "You have broken the covenants for repairing." The plaintiff has not condescended upon any details, and, in my opinion, the notice is not sufficient under s. 14.

1. To similar effect are the statements of Collins LJ in Penton v Barnett [1898] 1 QB 276 and Lord Russell CJ in Horsey Estate Ltd v Steiger [1899] 2 QB 79. Collins LJ said ([1898] 1 QB 276 at 281):

I think, however, that we ought to construe the words "particular breach" in the section according to the obvious intention of the Legislature, which was that the tenant should be informed of the particular condition of the premises which he was required to remedy. The expression "breach" means the neglect to deal with the condition of the premises so pointed out, and not merely failure to comply with the covenants of the lease. The common sense of the matter is, that the tenant is to have full notice of what he is required to do. He has had notice, and has failed to act on it; and with regard to that the physical condition of the premises which he was required to make good was the same when the action was brought as when the notice was given.

To determine the character of the required notice, what it shall contain and when it ought to be given, it is necessary to consider the scope of s. 14 of the Act of 1881 as a whole. The object seems to be to require in the defined cases (1.) that a notice shall precede any proceeding to enforce a forfeiture, (2.) that the notice shall be such as to give the tenant precise information of what is alleged against him and what is demanded from him, and (3.) that a reasonable time shall after notice be allowed the tenant to act before an action is brought. The reason is clear: he ought to have the opportunity of considering whether he can admit the breach alleged; whether it is capable of remedy; whether he ought to offer any, and, if so, what, compensation; and, finally, if the case is one for relief, whether he ought or ought not promptly to apply for such relief. In short, the notice is intended to give to the person whose interest it is sought to forfeit the opportunity of considering his position before an action is brought against him.

1. The statements in Fletcher v Nokes, Penton v Barnett and Horsey Estate v Steiger were quoted with approval in the leading case of Fox v Jolly [1916] 1 AC 1. Lord Buckmaster LC saw no reason to depart from the statement of North J in Fletcher v Nokes, "except so far as it seeks to establish the standard - often fluctuating and uncertain - of particulars in an action as a test of the sufficiency of the notice" (at 13). His Lordship went on to say that the particulars required for a notice in respect of a covenant to repair "would not necessarily be as detailed and minute" as the particulars required in respect of a claim for damages for breach of covenant (at 14).
2. Lord Atkinson was "quite willing" to accept the statement of North J, but said that it is to be borne in mind that the notice is addressed to a person who knows, or ought to know, the nature and condition of the premises, "so that a statement might be sufficient to draw his attention to the things of which the landlord complains, which might be insufficient so to do in the case of a stranger" (at 18).
3. Lord Parmoor said (at 22):

My Lords, in my opinion a notice is sufficient to comply with s. 14 if it specifies to the lessee the breach complained of, with such particularity, as fairly to tell him what it is he is required to remedy, if it is capable of remedy, and what it is for which he is required to make compensation in money. To determine whether a notice complies with this test depends on the information which the notice, as a whole, may be fairly said to give.

1. The impugned notice in Fox v Jolly was served by the lessor of six small houses. Annexed to the notice was a schedule of dilapidations, including, for example, "Make good all cement fillets and all flashings" and "Repair landings and other woodwork". Lord Buckmaster LC held that the notice sufficiently specified the landlord's complaints and gave the tenant adequate notice of what he was required to do. In reaching this conclusion, his Lordship said (at 11):

Now the schedule is attacked on several grounds. It is said that it does not tell the tenant what it is he ought to do in order to remedy the breach of which the complaint is made. I am not prepared to accede to that view of the schedule. But even if it did not, I can find nowhere in the section any words which cast upon the landlord the obligation of telling the tenant what it is that he must do. All that the landlord is bound to do is to state particulars of the breaches of covenants of which he complains and call upon the lessee to remedy them. The means by which the breach is to be remedied is a matter for the lessee and not for the lessor. In many cases specification of the breach will of itself suggest the only possible remedy. For example, complaint that a covenant to paint or to paper has been broken can only be met by painting and papering. But it does not follow that this is always so. A particular covenant to keep the roof watertight, if broken, would be sufficiently defined by a reference to the covenant, a statement that the roof had not been kept watertight, and that the tenant was required to remedy the omission; the means by which this could be accomplished would be for the tenant to determine.

1. The Australian position reflects the above authorities. In the second reading speech to the Forfeiture of Leases Bill, the Hon F B Suttor said that the object of the bill was to bring New South Wales law into conformity with the English law, and that:

The object of the bill is to give the lessee the right to have notice given to him before his lease is cancelled so as to have time in which to complete the necessary repairs and in which to pay the necessary compensation demanded by the lessor for breach of the covenant of the lease.

New South Wales Legislative Council, Parliamentary Debates (Hansard), 4 July 1900 at 619; 11 July 1900 at 816.

1. In Gerraty v McGavin [1914] HCA 23; (1914) 18 CLR 152 at 160 (decided before Fox v Jolly), Griffith CJ quoted with approval the statement that Collins LJ made in Penton v Barnett, and held that a notice merely quoting the covenant was insufficient. Isaacs J agreed in the result with Griffith CJ, saying that a lessor (at 164-165):

[M]ust then do what he would have to do if he had brought an action, namely, specify what he says is "the particular breach," and not merely state that there has been "a breach." If he does that, he is not bound to go further and instruct the tenant how to repair it. That would not only be an undue burden on the landlord, but, if effectual at all, would tie the tenant down to one particular mode of repairing his fault.

1. In Dogan v Morton (1935) 35 SR (NSW) 142 at 148, Davidson J (with whom Stephen and Street JJ agreed) referred to the English authorities and concluded:

The landlord must give the kind of particulars which will draw the attention of the lessee to the particular defect in the premises which he desires to have rectified in accordance with the covenant. The indication need only be such as would enable the lessee to understand with reasonable certainty what it is that he is required to remedy.

1. In Ex parte Dally-Watkins; Re Wilson (1956) 72 WN (NSW) 454 at 456, Street CJ (with the concurrence of Roper CJ in Eq and Sugerman J) said that the object of the notice is to bring to the attention of the lessee the matters which are complained of and to give him the opportunity of rectifying what has taken place in the past, if it be capable of rectification. To do so, the "vital thing" is to alert the tenant to the term of the lease alleged to have been broken and the manner in which it has been broken. Street CJ also held that the form set out in Sch 6 is not "a piece of sacramental ritual".
2. In Johnson v Senes & Berger (1961) 78 WN (NSW) 861 at 864, Wallace J said (referring to Horsey Estate v Steiger):

The object of this legislation includes not only the placing of restrictions on and the giving of relief against forfeiture and re-entry, but the placing of the lessee in a completely informed position so as to enable him to elect what shall be his subsequent conduct.

1. Finally, in Visser v Jacobs (1987) NSW ConvR 55-350 at 57,164, Bryson J explained that:

The underlying mechanism achieved by the working of sec. 129 is that provisions of leases which create rights of re-entry are not employed to deprive lessees of valuable leasehold interests if other measures are available to bring about the desirable result that covenants of leases are complied with and breaches of them are remedied.

Bryson J acknowledged that the "degree of specificity must vary with the circumstances and with the facts already known or manifest to the lessee". One of the bases on which the notice in Visser was held invalid was that it contained no specification of particular breaches (only the general subject of the breaches).

1. In my opinion, the above authorities clearly indicate that a notice under s 129 must not only allege breach, but must also describe the particular acts or omissions constituting the alleged breach; and the notice must indicate the acts of the tenant which the landlord would consider sufficient for the lease to continue, and upon completion of which the landlord would abandon its claim to forfeit. The standard of particulars or degree of specificity depends upon the circumstances, including the nature of the covenant alleged to be breached, the tenant's actual or constructive knowledge, and whether the landlord claims reasonable compensation. To use the example of Lord Buckmaster LC, where there are several options open to a tenant to waterproof a leaking ceiling, then that choice is at the tenant's discretion. Thus s 129 is, in my opinion, directed at allowing the tenant to bring about (within a reasonable time) a state of affairs under which the landlord would not pursue forfeiture.
2. In particular, the lessee should not be left to speculate as to whether, if it took whatever action it could to remedy the specified breaches, the lessor might nevertheless proceed to terminate the lease on the basis that the breaches were not capable of remedy or that, because what the lessee did was insufficient to eliminate loss caused to the lessor by the late performance of the lessee's obligations, the lessee was still in breach. [16]

106 The landlords submitted that the tenant was not required, in a statutory notice, to specify the means by which a breach was to be remedied. In Fox v Jolly[17] Lord Buckmaster LC said:

Now the schedule is attacked on several grounds. It is said that it does not tell the tenant what it is he ought to do in order to remedy the breach of which the complaint is made. I am not prepared to accede to that view of the schedule. But even if it did not, I can find nowhere in the section any words which cast upon the landlord the obligation of telling the tenant what it is that he must do. All that the landlord is bound to do is to state particulars of the breaches of covenants of which he complains and call upon the lessee to remedy them. The means by which the breach is to be remedied is a matter for the lessee and not for the lessor. In many cases specification of the breach will of itself suggest the only possible remedy. For example, complaint that a covenant to paint or to paper has been broken can only be met by painting and papering. But it does not follow that this is always so. A particular covenant to keep the roof watertight, if broken, would be sufficiently defined by a reference to the covenant, a statement that the roof had not been kept watertight, and that the tenant was required to remedy the omission; the means by which this could be accomplished would be for the tenant to determine.[18]

...

I think the notice which is to be given under s.14 ought to be such a notice as will enable the tenant to understand with reasonable certainty what it is which he is required to do. I do not mean that the landlord need go through every room in a house and point out every defect. But the notice ought to be so distinct as to direct the attention of the tenant to the particular things of which the landlord complains, so that the tenant may have an opportunity of remedying them before an action to enforce a forfeiture of the lease is brought against him.[19]

...

I have only to add that it would be very unfortunate if, in every case where a landlord was serving notice under s.14, he should feel himself bound to obtain a surveyor's detailed specification of the work to be done. It would greatly increase the cost which, if the work were performed by the tenant before proceedings were instituted, would fall on the landlord, or, if the tenant were compelled to obtain relief, would, by the Act of 1892, fall upon the tenant.

I am glad to think that no such obligation is imposed by the statute.[20]

107 The landlords submitted that the notices in fact specified the covenants in the leases which the landlord alleged to have been breached by the tenant, and the manner in which the breach had occurred. They argued that they were not required to spell out how the tenant was to respond. They submitted that even though the tenant was in external administration at the time, it could not claim the status as a stranger which knew nothing of the land, leases and management documents. They submitted that the liquidators of the tenant had legal advice available to them, access to the tenant's forestry staff, and to the books and records of the company.

108 Primary's complaints about the inadequacy of each notice, by its failure to specify the breaches, relied on a common form of allegation of breach of cl 6(b) as the vehicle to develop its case. An example of the common form of allegation was to the following effect:

The tenant is in breach of the Lease because it failed to establish, tend and manage the Plantation Crop in a proper and skilful manner in accordance with clause 6(b) by virtue of failure to conduct appropriate

(a) replanting of seedling trees (infill programme) where the seedling trees have failed; and

(b) weed control of the Plantation Crop.

109 Primary submitted that the reference to 'in a proper and skilful manner in accordance with cl 6(b)' or a variation of that phrase was used in every notice. It dissected the phrase pointing to a perceived difficulty with the word 'proper', which it submitted required unspecified criterion. In this part of its submission, Primary drew heavily on its submissions in relation to the alleged uncertainty of cl 6(b) in each lease, which I have rejected. Primary's complaint had no substance because, as I have found, the obligations in cl 6(b) had meaning, just as the common allegation had meaning to the lessor and lessee, both of whom understood and had agreed to the scope of the tenant's obligations to establish, tend and manage the Plantation Crop.

110 Primary identified, as a clear example of the difficulty with the notices, the allegation of breach constituted by a 'failure to conduct appropriate (a) replanting of seedling trees (infill programme) where the seedling trees have failed ...' It submitted that, read by a layman, one might think that if a single tree had failed there was a breach of cl 6(b). It submitted that the landlords' expert, Mr Cameron, had given evidence to the effect that there was a minimum stocking level of 85% below which infill planting was required. It discerned that obligation from the product disclosure statement that guaranteed a minimum 85% of trees after 12 months from planting. Primary submitted that the notice should have alleged a breach of cl 6(b), 'in that it has failed to comply with normal industry practice and company guidelines by failing to maintain as at [the relevant date or period] a minimum of 85% of the original number of trees planted'.

111 Primary submitted that, by such specification, the tenant would then know what it was required to do to comply with normal industry practice and company guidelines - it was required to achieve not less than 85% of the initial planted stock. The tenant would know that the current stocking level was below 85%, and the landlord's expectation of compliance to bring stocking back up to the minimum level.

112 In my opinion, Primary's complaint concerning the lack of specificity of the 'infill' breaches is without substance. It was not for the landlord to prescribe the way in which the tenant was to remedy the breach. The interpretation by Mr Cameron as to a minimum stocking level, by reference to a product disclosure statement is, in my view, beside the point. The management obligation imposed on the lessee is expressed in cl 6(b). Nothing was being done by the tenant to tend and manage the plantations, and where necessary, replant seedlings. If, according to the tenant's management practices, infill planting was only necessary to establish 85% of the initial planting, that was the extent of its obligation.

113 Primary submitted that the employment in the notices of words such as 'appropriate' and 'proper' were fatal, because they failed to state a criterion by which compliance could be understood. It submitted that these were not technical objections but went to the heart of the purpose of the notice. Primary submitted that notices failed to have sufficient certainty so that the lessee was not left in any doubt as to what was alleged against it. Primary submitted, that the landlords had left the tenant to speculate as to what the landlords intended by words such as 'proper' and 'appropriate'. As I have already said, such was the nature of the management obligation in the leases, and the business of the tenant, that it was under no misapprehension as to what was required.

114 In my opinion the reference to appropriate (a) replanting ... and (b) weed control ... must be read against a background of the overarching obligation in cl 6(b) of each lease, the nature of the business undertaking carried on by the tenant until its collapse, the commonly understood standards by which the plantations were to be managed, and finally, the collapse of the group and the tenant's concession that it would no longer maintain the plantations.

115 A related contentious issue between the parties, concerning compliance with statutory preconditions, was the extent to which a landlord could rely upon the knowledge of the recipient of a notice, in this case the tenant, to comprehend what the landlord required to avoid termination. The landlords accepted that they were required to bring to the attention of the tenant the terms of the covenant in the lease alleged to have been broken, and the manner in which it was said to have been broken.[21] They distinguished between a requirement to specify the particular breach and the need to go that step further and give particulars of the breach. The landlords submitted that particulars were not required. In Jolly v Brown[22] Buckley LJ said:

He must specify the particular breach of the covenant in question. What he has to do is to give a notice specifying the particular breach of a covenant in the lease of which he makes complaint. If the breach complained of be breach of a covenant to repair, the obvious intention of the Legislature is that the attention of the tenant shall be particularly called to the particular condition of the premises which the tenant is required to remedy, so that he may remedy it if he be so minded. The right of re-entry or forfeiture arises upon neglect on the part of the tenant to remedy it if he be so minded. The right of re-entry or forfeiture arises upon neglect on the part of the tenant to remedy the condition of the premises to which his attention is thus called. It is not, for instance, sufficient that the lessor should give the tenant notice that he has broken the covenant to repair. The tenant is entitled to know how he is said to have broken it. For instance, that he has broken it by not reglazing broken windows, or by not rebuilding a demolished party wall, or by not keeping the roof in proper repair. But the lessor is not bound to go on and say the broken windows are situate at such and such places or the repair which the roof requires is to replace so many tiles or slates found in such and such positions. The notice must be one which calls the tenant's attention to the particular condition of the premises which is alleged to be defective. It need not identify every defect in the conditions to which attention is called. The breach of a covenant must arise by either doing or neglecting to do some act. The particular breach complained of is specified when the act which the tenant has done or which the tenant has neglected to do is specifically pointed out. This is done when the lessor says you have not repaired the roof or you have not glazed the windows. The argument has largely proceeded in my opinion upon a confusion between two things which are distinct, namely, specifying the particular breach complained of and giving particulars of the breaches complained of.

116 The landlords submitted that the statutory notice must be interpreted in accordance with business common sense, and taking into account 'the relevant objective contextual scene'. They submitted that the issue was how a reasonable recipient would have understood the notice. The landlords relied on Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd.[23]

117 The facts in Mannai concerned the sufficiency of a notice under a lease purporting to terminate a tenancy. It did not concern a statutory notice. Nevertheless, it was submitted by the landlords that the general principles of construction as applied in Mannai were equally applicable in the present case. In the notice in Mannai the landlord had given an erroneous termination date. The date of termination was specified as one day earlier than the permissible date. The majority in the Court of Appeal held that the construction of the notices had to be approached objectively, and the question was how a reasonable recipient would have understood the notice, bearing in mind the context. They held that the purpose of the notice was to inform the landlord of the tenant's decision to determine the leases in accordance with the break clauses; and that a reasonable recipient with knowledge of the terms of the leases, and of the third anniversary date, would have been left in no doubt that the tenant wished to terminate the leases on 13 January 1995, but had wrongly described it as 12 January. Accordingly, the notice was held to have been effective. Lord Steyn stated the following propositions:

(1) This is not a case of a contractual right to determine which prescribes as an indispensable condition for its effective exercise that the notice must contain specific information. ...

(2) The question is not how the landlord understood the notices. The construction of the notices must be approached objectively. The issue is how a reasonable recipient would have understood the notices. and in considering this question the notices must be construed taking into account the relevant objective contextual scene. ...

(3) It is important not to lose sight of the purpose of a notice under the break clause. It serves one purpose only: to inform the landlord that the tenant has decided to determine the lease in accordance with the right reserved. ...

(4) There is no justification for placing notices under a break clause in leases in a unique category. ...[24]

...

In determining the meaning of the language of a commercial contract, and unilateral contractual notices, the law therefore generally favours a commercially sensible construction. The reason for this approach is that a commercial construction is more likely to give effect to the intention of the parties. Words are therefore interpreted in the way in which a reasonable commercial person would construe them. and the standard of the reasonable commercial person is hostile to technical interpretations and undue emphasis on niceties of language. In contradistinction to this modern approach Lord Greene MR's judgment in Hankey v Clavering [1942] 2 KB 326 is rigid and formalistic. Nowadays one expects a notice to determine under a commercial lease to be interpreted not as a 'technical document' but in accordance with business common sense.[25]

118 In the present case, the landlords relied upon the following background circumstances, to support their contention that a reasonable recipient would have had no difficulty in understanding what was required in order to avoid termination:

(a) the tenant's knowledge or assumed knowledge of the state of each plantation;

(b) the explanations in the product disclosure statements about the standard by which the tenant would manage the plantation;

(c) the relevant sections of Great Southern's Forestry Operations Manuals;

(d) the report to growers dated September 2009, noting that work had not been done as a result of lack of funds; and

(e) the tenant's insolvency, lack of staff, and inability to raise funds to cure defaults.

119 The significance of this part of the debate between the parties was a little elusive, unless understood in the context of the pleadings, as an issue which overlapped substantially with Primary's contention that cll 6(b) and (f) were ambiguous or uncertain. Primary had alleged, in paragraphs 21 and 28 of its statement of claim, that the notices of default failed to specify the breaches in accordance with the statutory requirement. The particulars imported its 'ambiguity and uncertainty' case, and applied the same complaints to the terms of each notice, which, Primary said, did not enable the recipient to make a judgement as to what was required to avoid termination. The landlords' response, by way of defence, was to allege that the tenant well knew what it was required to do, namely, manage and maintain the plantations. The landlords submitted that the tenant's own manual explained how this was to be done. That was the context in which the landlords advanced 'the relevant objective contextual scene' mentioned above.

120 Quite obviously, where there is a statutory requirement that something be included within a compliant notice, that requirement may not be overlooked on the basis that the recipient would have understood the missing ingredient. That was the force and substance of Primary's submissions in response to the landlord's reliance on background circumstances. Primary submitted that there was a fundamental distinction to be made between the formal requirements of a notice and its efficacy in conveying the information required by the clause. Primary submitted that the latitude available by invoking the 'reasonable recipient test' was only to overcome defects or imprecision in relation to the adequacy or accuracy of the information conveyed, not compliance with a statutory obligation.[26] In Akici, Nueberger LJ said,

Even applying Mannai, the notice has to comply with the requirements of s 146(1) of the 1925 Act, and if, as appears pretty plainly to be the case, it does not specify the right breach, then nothing in Mannai can save it.

121 This was not a case where the tenant was expected to read between the lines in order to understand what the landlords required should be done to remedy the breach. What was to be done, if the breach was to be remedied and forfeiture avoided, was for the tenant to resume its management of the plantations according to its own forestry manuals. Had it done so, and communicated a credible position to the landlords for the resumption of its obligations, and offered reasonable compensation for any damage to the reversion, the landlords would not have been in a position to terminate. At the very least, the tenant would have had strong grounds to apply for relief against forfeiture.

122 There was an air of unreality about Primary's submission concerning the extent to which the allegations of breach were vague or uncertain, and its rejection of the knowledge of the tenant as a relevant consideration. The business of the tenant was to establish and maintain the plantations. By reason of the collapse of the Group, the tenant had ceased performing those functions. It was no longer tending or managing the plantations in any manner or according to any practice. It was, quite simply, not performing any part of its obligation set out in cl 6(b) of each lease.

123 Following the collapse of the Group, and the tenant's inability to continue to perform its management functions in relation to the plantations, it might well have been adequate for each of the notices to have identified a breach under cl 6(b) in more general terms, such as a failure to tend and manage the Plantation Crop as required under cl 6(b), without descending to further particularity. If the tenant was inclined to remedy such a breach there was no misunderstanding as to what was to be done. It would be required to recommence management of the plantations. That would also address the specific consequences of breach identified by the landlords. As particulars.

124 Ultimately, the debate over the extent to which the tenant's knowledge and surrounding facts could be relied upon to construe the notices, became arid. It was resolved in part by the findings in relation to the certainty of meaning of expression in cl 6(b) and the statement of breach in the notices of default. More particularly, it was resolved by the tenant's acknowledgment of its continuing overarching breach due to insolvency.

125 Primary alleged that the statutory notices must specify the compensation demanded with such particularity as to fairly, precisely and with reasonable certainty, inform the tenant of what was alleged in order that the tenant could make a judgment to remedy the breach, or offer compensation, or seek relief from forfeiture, or otherwise contest the alleged breaches. Primary alleged that in every case the notices failed to state the sum the lessors would accept, or required as reasonable compensation, or otherwise failed to provide any particulars of compensation which would be acceptable if re-entry or forfeiture were to be avoided.

126 Primary submitted that while the landlords were not required to claim compensation they had done so. It submitted that the claim for compensation was not to be confused with the cost of remedying the defaults, but was an amount that must be paid in addition to remedying any default. Primary submitted that compensation demanded in a notice, where the breach was remediable, was the loss flowing from the breach which was not offset by the remediation of the breach.[27] Primary submitted that the purpose of the notice of default was not satisfied if a bald claim was made upon the tenant 'to make reasonable compensation in money to the landlord for the said breaches of Lease'.

127 The landlords argued that the quantum of compensation may, but need not, be specified in a statutory notice. They argued that there was no requirement in s 146(1) of the Property Law Act, or the corresponding provisions, to specify the amount of compensation. They relied upon Campus and Stadium Island Development Ltd v Dublin Waterworld Ltd[28] in which Gilligan J said of s 14(1) of the Conveyancing Act 1881:

I take the view that it is not necessary to set out in monetary terms the actual amount of the compensation being claimed and that a landlord may claim compensation in general terms and leave it to the tenant to ascertain the precise amount as the tenant is the only party with all the relevant knowledge as to what should be done about the alleged breaches and the only party with the relevant knowledge as to how much it may cost to remedy such breaches since he occupies the premises.

I take the view that s.14(1) of the Conveyance Act, 1881 effectively requires the tenant to remedy the breaches and to make reasonable compensation in money to the satisfaction of the lessor within a reasonable period of time following service of the forfeiture notice.

128 Primary relied upon the decision of the Court of Appeal of New South Wales in Macquarie to support its contention that the amount of compensation must be quantified. In my opinion, Macquarie does not stand for any such proposition. In that case the notice was directed to a default on the part of the tenant by its failure to pay amounts under a car park lease. The notice of default did not purport to claim compensation as an additional component of a demand made under s 129 of the Conveyancing Act 1919. Hodgson JA held:

[325] In the present case, the notices did not express any requirement to do anything. Even accepting that they can be read with cl 16 of the Car Park Lease and cl 17 of the Hospital Lease, they did not alert Macquarie as to whether Area Health was asserting that the breaches were remediable by payment of money (and if so, what was "all money necessary to remedy the Event of Default"), or were remediable other than by payment of money (and if so, by what), or were not remediable (and if so, what compensation would be to the reasonable satisfaction of Area Health). Specifically, the notices did not indicate whether Area Health was claiming interest on money that had not been paid at the times required by the agreements, or was claiming that the failure to complete the car park or substantially commence the hospital by 31 June 1999 caused loss entitling Area Health to compensation even if Macquarie proceeded in response to the notice to do these things.

[326] Accordingly, the notices did not convey to Macquarie what Area Health claimed Macquarie needed to do to avoid the failure referred to in s 129(1) which would then permit Area Health to exercise its right of re-entry or forfeiture. [29]

129 The defect in the notice in Macquarie was that it did not express a requirement to do anything. Hodgson JA continued:

[327] A s 129 notice is not invalidated if the lessor includes in it specification of breaches that a court later finds were not committed: Fox v Jolly. In my opinion, it would follow from this that an otherwise valid s 129 notice is not invalidated just because the lessor requires the lessee to remedy a breach that has not in fact occurred, or to pay an amount in compensation that is more than what is reasonable. In such cases, if the lessee does not wish to comply with requirements in the notice to the extent that the lessee considers them excessive, the lessee may take the risk of not complying fully with the lessor's requirements; and if the lessor then purports to forfeit the lease and the matter comes to litigation, the lessee may or may not be successful. But in such a case, at least the lessee is given information as to what the lessor requires and can be confident that if these things are done there will be no forfeiture. The notices in this case did not perform that function. [30]

His Honour's observations concerning the validity of a s 129 notice do not, it seems to me, goes so far as to suggest that when a bald claim for compensation is made, unspecified as to amount, the notice is invalid.

130 The landlords submitted that one purpose of a statutory notice was to give the tenant the opportunity of considering 'whether he ought to offer any, and if so, what compensation'. In Horsey Estate Ltd v Steiger, [31] Lord Russell CJ said:

The object seems to be to require in the defined cases (1.) that a notice shall precede any proceeding to enforce a forfeiture, (2.) that the notice shall be such as to give the tenant precise information of what is alleged against him and what is demanded from him, and (3.) that a reasonable time shall after notice be allowed the tenant to act before an action is brought. The reason is clear: he ought to have the opportunity of considering whether he can admit the breach alleged; whether it is capable of remedy; whether he ought to offer any, and, if so, what, compensation; and, finally, if the case is one for relief, whether he ought or ought not promptly to apply for such relief. In short, the notice is intended to give to the person whose interest it is sought to forfeit the opportunity of considering his position before an action is brought against him.[32]

131 The notice in Horsey Estate was found not to comply with the requirements of s 14 of the 1881 Act. The notice was served two days prior to the issue of the writ seeking possession. The plaintiffs admitted at trial that they were in no position to rely upon the alleged breach for non-repair. An extensive schedule of repairs was attached. Two days was not a reasonable time. But they also relied upon other breaches. These included the tenant's insolvency, and breach by under-letting. The Court of Appeal held that there was no breach by under-letting. Lord Russell CJ said:

... if the entering upon liquidation had alone been put forward, the defendants would have had the opportunity of considering whether they had any answer, and, if not, whether they could make terms with the plaintiffs, but this was impracticable so long as the claim for breach of covenant to repair was made. Again, if non repair was alone relied on, the defendants might possibly by offer of compensation accompanied by undertaking to repair have made terms with the plaintiffs.[33]

132 It seems tolerably clear that Lord Russell CJ was of the opinion that a claim for compensation provided the tenant with an opportunity to avoid termination by making an offer of compensation, accompanied by undertaking to remedy the breach. The relevant shortcoming in the notice was that two days was not a reasonable time. Translated into the context of this case, it might be said that a sufficient response by the tenant to the notices would have been to undertake to recommence management of the plantations and perform its obligations under each lease and forestry agreement, which would necessarily involve remediating the consequence of its lapse in management at the appropriate time in the management cycle. The tenant could also agree to pay reasonable compensation for any damage to the reversion. If viewed from that perspective, a reasonable time to respond to the notice would be the time required to decide whether to put such a proposal to the landlord.

133 A landlord will rarely be in a position to specify the amount of compensation necessary to satisfy a reasonable demand. I accept the submission of Primary that compensation is directed to loss suffered as a consequence of damage to the reversion. It is not intended as a substitute for remediation. But just as the landlord will rarely be able to precisely quantify compensation, so the tenant will rarely be in a position to do more than agree to pay a reasonable sum. The question as to what is reasonable may be capable of negotiation, but if not, it may be determined by a court. Thus, Primary's complaint that the notices failed to specify an amount of compensation misunderstood the nature of the response required from the tenant if it wished to avoid forfeiture.

134 In paragraph 5(b)(v) of its reply and defence to counterclaim, Primary alleged that prior to 2 May 2010 the landlords and tenant were all controlled by the receivers who decided that the tenant would not perform its management obligations. Primary alleged that prior to issuing the notices of default the landlords knew that the tenant had determined not to perform its management obligations and was not performing those obligations. Primary alleged that the landlords took no action to enforce the covenants under the leases and forestry agreements and therefore consented to the tenant's non-performance, and thereby waived the breaches alleged in the notices of default, or are estopped from relying upon them.

135 These allegations were not developed by Primary. They are without substance. The allegations overlooked the continuing nature of the breach which was brought about by the collapse of the Group. They incorrectly focussed attention on the continuing breach as the object of waiver by the landlords. The landlords' right to terminate for breach of a covenant, other than for rent, only arises when and if a tenant has failed to comply, within a reasonable time, with a notice under s 146(1) of the Property Law Act, or other relevant provision. The relevant question was whether that right had been waived.[34] The evidence did not support waiver of that right - it was to the contrary.

136 Even if the circumstances prior to service of the notices were relevant to the question of waiver, the defining event was the Group's collapse. Absent funding, the tenant was unable to perform its obligations. Its position did not change after service of the notices of default, except to acknowledged its breach. The tenant took no step to prevent termination of the leases by the landlords, and stood by while the landlords entered into contracts of sale for the land.

137 The landlords submitted that for a number of properties remediation was not possible, because of the nature and extent of the damage done to the plantation through the tenants failure to manage. They pointed to some cases in which it was too late to apply fertiliser, because the plantation had failed. Primary submitted that even if all the trees were dead the breach could still be remedied, by replanting and the payment of compensation. It submitted that the potential loss of rental, occasioned by a consequential delay in the maturation of trees, could be compensated by an award of damages.

138 Insofar as it is relevant, I am of the opinion that the breaches identified by the landlords in each of the notices was capable of remediation, if only by the tenant recommencing performance of its management obligations and maintaining the plantations according to 'sound silvicultural and environmental practices'. If that meant replanting some or all of the plantation, then that was the tenant's responsibility. I think Primary's submission on this point is correct.

139 The real point, however, of the landlords' contention about the inability to revive irreparably damaged plantations, was that they were not required to await the time required to complete remedial works before termination, when it was plain that the tenant could not and would not do so, because of its insolvency. That proposition is obviously correct and dealt with in more detail below.

140 As to what is a reasonable time within which a lessee is to respond to a statutory notice depends upon the purpose for which the notice is given, the nature of the breaches alleged and what is required to be done to avoid forfeiture. The periods between notice and termination in the present case ranged from one month and two days to almost two months.

141 Primary alleged that the period allowed by the landlord between the time of the notice of default and the date of the notice of termination was not reasonable to rectify the alleged breaches. It submitted that a reasonable time was the time necessary to actually undertake the work, some of which could not be completed for a year or more. Primary relied on passages in a number of authorities which suggest that it is only when the tenant, required to remedy a breach, has failed to undertake and complete the remedial work that action may be taken by the landlord to assert the right of forfeiture, re-entry or termination. For example, in Fox v Jolly[35] Lord Buckmaster said:

Before the passing of the Conveyancing Act of 1881, a right of re-entry reserved in a lease conditional upon breach of a covenant to repair could be enforced by the landlord at common law without the tenant having opportunity to meet the complaint, and often without his knowing that the breach had in fact occurred. It is true that the Courts of Equity attempted to mitigate the harshness of this procedure, and in several reported cases restrained the landlords from exercising their rights where the breach was one which, by accident or surprise, the tenant had been unable to rectify. There was, however, no general rule relating to such relief on which reliance could be placed. In these circumstances the Conveyancing Act of 1881 was passed, and it was to extend and render certain the rights of tenants in such cases that s 14 of that statute was framed. Sub-s 1 of that section is in the following terms:-

"A right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant or condition in the lease, shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice specifying the particular breach complained of, and, if the breach is capable of remedy, requiring the lessee to remedy the breach, and, in any case, requiring the lessee to make compensation in money for the breach, and the lessee fails, within a reasonable time thereafter, to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor, for the breach."

The effect of this sub-section is plain. The right of re-entry which the lessor enjoys on the breach of a covenant is not capable of being exercised against the lessee until the conditions in that sub-section have been satisfied. If such condition were not satisfied and entry were attempted at common law, such entry would be a trespass; if proceedings were instituted to obtain possession they would be instantly demurrable. That is the meaning of the phrase, "shall not be enforceable by action or otherwise." Now the conditions precedent which the lessor must perform are these. He must serve a notice, and that notice must specify the breach of covenant which is the subject of complaint. That is, he must point out the covenant which he says is broken, and he must specify the breach of which he complains. He must also call upon the lessee to remedy the breach, and if he requires compensation in money he must ask for it. After this has been done a reasonable time must elapse in which the lessee has the opportunity of complying with the requirements of the notice. It is only when this has been done, when the time has expired, and the work is incomplete, that the landlord can proceed to the assertion of his rights. [36]

142 Primary also relied on Nashvying Pty Ltd v Giacomi[37] in which Muir JA, with whom McMurdo P and Dutney J agreed, said:

The notice thus allowed the lessee 30 days within which to remedy the subject breach. That is hardly a reasonable time as the above discussion shows. I note that the appellant's outline of argument submits that "a reasonable time in which to obtain a permit would be whatever period was necessary to prepare the necessary material, make the application and, if necessary, fight any appeal. The evidence shows that that can be done in about 69 weeks. [38]

143 Primary adduced evidence from a property lawyer, Michael Redfern, to the effect that he would require between 19 and 37 working days in which to properly advise the tenants in respect of its obligations, but that this would very much depend upon how long it took to obtain written reports from experts. Presumably, depending on delays in obtaining expert reports, the time taken to provide advice might exceed 37 working days.

144 Primary also called evidence from Mr Quill concerning remediation work. He opined that seasonal factors affected the timing of remediation work, when added to the time required for foliar and soil analysis, may extend the time for remediation beyond one year. He spoke of the needs for property inspections, the time required to take foliar and soil samples, the time required to obtain laboratory reports, sourcing and blending of appropriate fertiliser in compliance with the laboratory reports, and the time to arrange a contractor to apply the fertiliser. He said that controlling insects could take one month. Managing weed competition, two months. These tasks were seasonal and would not necessarily be done immediately.

145 Primary submitted that all notices of default required remediation within 30 days, but that remediation work could not reasonably be commenced within that time. Mr Quill and Mr Cameron said that the preparation of fire breaks should be carried out in the period September to November, depending on ground conditions. Weed control would depend upon the nature of the weeds and the optimal time for the application of herbicides. Insect control depended on the lifecycle of the insects if they were to be controlled by insecticides. Mr Cameron said that the optimum time for foliar sampling was in the period February to May. Mr Quill and Mr Cameron said that the application of appropriate fertilisers, following foliar sampling, would depend upon weather conditions and the time of the year. Primary submitted that, on any view of the evidence, all alleged breaches could not be remedied within the period allowed by the lessors in respect of each notice of default or before the notices of termination were served.

146 The landlords submitted that the requirement for reasonable time in a notice was to provide the tenant with an opportunity to consider its response, not to complete all required remediation work. If, as Primary submitted, a landlord was not entitled to exercise its right to forfeiture or re-entry until the whole time had elapsed within which the tenant might reasonably be expected to have completed the remediation work, it may be required to wait for more than a year. Such an outcome would require the landlord to stand out of its remedy, as the seasons passed and the time for the various components of remediation work came and went, notwithstanding the fact that the tenant may have expressed an intention of not doing the work, or may not have the capacity to do so. They submitted that such a consequence would be absurd.

147 The true purpose of the notice is to give to the tenant an opportunity to consider its position and give a response. If the breach is capable of remedy, that response may be to admit the breach and propose a course of remediation. If compensation is sought, that response may involve agreement to pay reasonable compensation to be assessed. If the breach is not admitted, or the landlord rejected a proposal for remediation, the tenant may then apply for relief against forfeiture. In the present case, having received the notices of default, a sufficient response from the tenant to avoid forfeiture, re-entry or termination, would have been to recommence management of the plantations in compliance with its obligations under each lease and forestry agreement, coupled with a proposal to pay reasonable compensation for any injury to the reversion. In my view it would not have been necessary for the tenant to do more in order to avoid the risk of termination, provided the tenant had the capacity and communicated a genuine intention to do as proposed. Nothing of the kind was communicated by the tenant to any of the landlords. The fact that the remediation work, identified in the notices, might take one or more years was not a determining factor in the calculation of a reasonable time within which to respond.

148 The tenant did not have the financial and other resources to enable it to resume its obligations to manage the plantations. It was insolvent and had ceased operations. It was in no position to remedy the alleged breaches. In such circumstances, were the lessors obliged to stand by and wait for the passing of seasons, when the remediation work might ordinarily be undertaken, before exercising their right to terminate the leases? In my opinion they were not. The absence of any response from the tenant, prior to termination, satisfied the precondition to the landlords' right to terminate.

149 Putting to one side the admitted insolvency of the tenant, and the acknowledgements by the receiver, and subsequently the liquidator, that it had no money with which to manage the projects or to remedy the alleged breaches, I am of the opinion that one month was more than enough time within which to respond, in a meaningful way, to the alleged breach and claim for compensation. A response did not require foliar and soil tests, the selection, mixing and application of fertiliser, weed and insect control regimes, the creation of firebreaks or replanting to take place. Nor did it require the inspection of each plantation or complex legal advice. The tenant was well aware of its obligation to manage the plantations, and that it had ceased to perform its obligation. It was aware of the content of its own management programs to be implemented if it were to comply with its obligations. It would be entirely unrealistic to conclude that the tenant, through the liquidators, did not understand from the notices of default what steps were required to avoid termination. The liquidators might have, but did not respond within a very short period of time, assuring the landlords that the tenant would resume management and offering reasonable compensation. They did not, for the obvious reason expressed by them in a letter to the chairman of Save My Trees on 31 May 2010. The tenant did not have the funds to maintain the properties and was unable to do so.

150 The overarching breach, notified to the tenant in each of the notices of default, was the tenant's failure to manage the plantations. That fact was not in dispute. Primary did submit that the landlords had failed to prove each of the breaches. By that submission was meant the particular element of forestry management that required remediation. I have found that the particular consequences of the failure to manage have been proved by the landlords. In my view, the focus of attention in this case on the particular elements of management, expressed in each notice of default, was unnecessary. The notices of default may well have stopped short of identifying the particular problems caused by the lack of management on each plantation. The notice may validly have descended to no more detail in relation to the alleged breach than to identify the obligation to manage the plantations and that there was a breach of that obligation. The added, and in my view unnecessary, particularity gave Primary a springboard to advance an unrealistic case that the time allowed was unreasonable. That case missed the point. The breach was much more fundamental, and a sufficient response to avoid termination would have been relatively straightforward.

151 In Billson v Residential Apartments Ltd[39] the Court of Appeal in England considered a case in which tenants embarked upon the conversion of premises, despite the inclusion in the lease of a covenant against alterations without the written consent of the landlord. The landlords served a notice under s 146(1) of the Law of Property Act 1925 requiring the tenants to remedy the breach of covenant. The tenants ignored the notice and continued with their building works. The landlords peaceably re-entered the vacant premises, changed the locks and fixed notices to the door to the effect that the lease had been forfeited. The tenants re-took possession. The landlords brought a proceeding claiming possession and the tenants counterclaimed for relief against forfeiture. The tenants contended that the breach was remediable by reinstating the property to its condition before the alterations but that reinstatement would take some four months and therefore re-entry 14 days after service of the notice did not allow a reasonable time. Sir Nicholas Brown-Wilkinson VC, as he then was, (Lord Justices Parker and Nichols agreeing on the point) said:

... In my judgment, even if the breach was capable of remedy the defendants' actions in continuing to press on with the work in defiance of the warnings and in defiance of the section 146 notice demonstrated that the defendants had no intention to remedy the breach at all. It is to be noted that the section 146 notice itself does not have to limit a time within which the breach is to be remedied. All that the statute requires is that a reasonable time to remedy the breach must elapse between service of the notice and the exercise of the right of re-entry or forfeiture. If the actions of the lessee make it clear that he is not proposing to remedy the breaches within a reasonable time, or indeed any time, in my judgment a reasonable time must have elapsed for remedying the breaches once it is clear that they are not proposing to take the necessary steps to remedy the breach but are committing further breaches. If this were not the case, what would the landlord's rights be if the defendant continued to commit the very breaches complained of by the section 146 notice after the date of its service? If he were to take proceedings to restrain further breaches of covenant, he would subsequently be faced with the contention, (such as that advanced by the defendants based on the threat of proceedings in the letter dated 30 June 1989) that the landlord had waived his right to forfeit by seeking to enforce the covenants. The only effective remedy of a landlord, faced with intransigent behaviour such as that of the defendants in the present case, must be to forfeit the lease on the ground that whatever time was allowed the defendant was showing no intention of remedying the breach at all.

In my judgment, given the stance adopted by the defendants in response to the section 146 notice, a reasonable time did elapse for the defendants to stop doing the work and either apply for the necessary consents or put forward proposals for remedying the breach.[40]

152 The decision in Billson turned on the jurisdiction to grant relief against forfeiture after a landlord had re-entered. The trial judge held that because the tenants re-took possession, the court had no jurisdiction to grant relief. The House of Lords held that the tenant was entitled to make application for relief against forfeiture and have their application heard and determined. The House of Lords did not, however, criticise the reasoning of Sir Nicholas Brown-Wilkinson, mentioned above, which I would respectfully adopt as a common sense approach to ascertaining the nature of a tenant's response to a notice of default. In the present case, the tenant did nothing to resume its management obligations at all following receipt of the notices of default, and thus conveyed to the landlords that it did not propose to change its previous position - inaction due to insolvency. Mr Saker, the liquidator of the tenant, deposed that at the time of receiving the notices of default, the tenant was insolvent and without any funds. He said that it was not in a position to remedy any of the breaches.

153 Short of a 'white knight' coming to its rescue, the incapacity of the tenant to manage the plantations and perform its obligations under each lease and forestry agreement was not contested. The landlords were entitled to treat the lack of a positive response from the tenant, following service of the notices of default and prior to notice of termination, as a clear indication that the tenant did not propose to take any step in satisfaction of the notices of default, or to take any step to avoid termination.

154 Primary took issue with the reliance placed by the landlords on the tenant's conduct after the service of the notices of default. They took the landlords to have argued that if it be found that the tenant would not or was unwilling to rectify the breaches, then the landlord was not required to wait a reasonable time before forfeiting the leases. Primary submitted that the facts in Billson were to be contrasted with the present circumstances, because it was evident in Billson that the tenant was acting in wilful transgression of a covenant after service of the notice. It submitted that there was no evidence of 'intransigent behaviour' in this case.

155 Primary's submission missed the point. It was not necessary to characterise the tenant's behaviour as a wilful transgression or intransigent. Once the overarching breach had been identified - failing to manage the plantations pursuant to the obligation in cl 6(b) - it became readily apparent that the breach had occurred some considerable time prior to the service of the notices of default, and continued thereafter.

156 Primary also submitted that the lack of financial means, or the tenants apparent lack of will to remedy the breach, did not permit the landlords to avoid the obligation imposed on them under s 146, to give notice to the tenant of the breach and, if the breach was remedial, a reasonable time in which to do so. In Expert Clothing Service & Sales v Hillgate House Ltd[41] Slade LJ (with whom O'Connor and Bristow LJJ agreed) said of a submission by the lessor, that a breach was incapable of remedy, because the lessee had neither the financial means or the will to do the necessary work,

In contrast with breaches of negative user covenants, the breach of a positive covenant to do something (such as to decorate or build) can ordinarily, for practical purposes, be remedied by the thing being actually done if a reasonable time for its performance (running from the service of the section 146 notice) is duly allowed by the landlord following such service and the tenant duly does it within such time.[42]

...

Though he (the landlord's counsel) has submitted that a requirement directed to the defendants to remedy the breach would have been purposeless, on the grounds that they had neither the financial means nor the will to do the necessary work, these are matters which, in my opinion, a landlord is not entitled to prejudge in drafting his notice. An important purpose of the section 146 procedure is to give even tenants who have hitherto lacked the will or the means to comply with their obligations one last chance to summon up that will or find the necessary means before the landlord re-enters.[43]

...

In my judgment, on the remediabilty issue, the ultimate question for the court was this: if the section 146 notice had required the lessee to remedy the breach and the lessors had then allowed a reasonable time to elapse to enable the lessee fully to comply with the relevant covenant, would such compliance, coupled with the payment of any appropriate monetary compensation, have effectively remedied the harm which the lessors had suffered or were likely to suffer from the breach? If, but only if, the answer to this question was "No," would the failure of the section 146 notice to require remedy of the breach have been justifiable.[44]

...

My conclusion, therefore, is that the breach of the covenant to reconstruct, no less than the breach of the covenant to give notice of charges, was "capable of remedy."[45]

157 Primary also relied on Batson v De Carvalho,[46] which was also a case in which remediability was the issue. Sugerman J said:

... He may in the result be unable to do so, e.g. because he cannot, in the case of a breach of a covenant to repair, obtain the requisite materials. Or the actual remedying of the breach may depend upon securing the concurrence of some person other than the lessee, and in the result it may not be secured. But I think it may none the less be said, looking at the matter as at the date of notice, that the breach is "capable of remedy" within the meaning of the section. Hence it seems to me that a breach consisting in parting with possession or subletting without the consent of the lessor may, in some, if not in all, cases, be capable of remedy by applying for and securing that consent. [47]

158 The case Expert Clothing Ltd did not support Primary's contention. It was concerned with remediability. The notice of default in that case gave no opportunity to remedy the affirmative obligation. These cases do not establish that the financial capacity of the tenant is irrelevant to ascertaining its response to a proper notice. In the present case, where the tenant was unable to discharge its management obligations, and had so informed the investors and the landlords, the continuation of that stated incapacity after service of the notices of default, absent any step to recommence management or inform the landlords that it had or would recommence management, are facts from which the tenant's response was clear. The tenant was, in effect, making a continuing representation that it could not, and would not, perform its management obligations and remedy the breaches.

159 Primary alleged that the notices of default were required to be served on each sub-lessee from the tenant. The sub-lessees were, of course, the investors or growers participating in the 2007 Scheme. There were around 4000 investors holding 43,989 woodlots. Not all of the land originally employed in the 2007 Scheme was the subject of this application. Leases from third parties had been disclaimed by the liquidators. This proceeding only concerned the leases granted by the landlords, and even then Primary has indicated that it does not wish to continue with some of those as part of a restructured scheme. Only around 1,100 investors have elected to participate in the proposed restructure by Primary. The evidence did not disclose the number of sub-tenants on whom Primary would have had the landlords serve the notices of default. Primary's contention was one of principle - service on all relevant sub-tenants was essential, and a failure to comply with that requirement invalidated termination of the leases by the landlords. There was no service of the notices of default on any investor who was a relevant sub-tenant.

160 Primary submitted that the extended meaning of 'lessee' in s 146(5) of the Property Law Act, and the corresponding provisions, captured the investors as lessees for the purpose of compliance with s 146(1). It submitted that the words 'original or derivative under-lessee' were intended to extend the protection afforded by the notice to the lessees to enable them to take action to avoid termination. Section 146(5) provides:

(5) For the purposes of this section except so far as is otherwise provided -

(a) lease includes an original or derivative under-lease; also an agreement for a lease where the lessee has become entitled to have his lease granted; also a grant securing a rent by condition;

(b) lessee includes an original or derivative under-lessee, and the persons deriving title under a lessee; also a grantee under any such grant as aforesaid and the persons deriving title under him;

(c) lessor includes an original or derivative under-lessor, and the persons deriving title under a lessor; also a person making such grant as aforesaid and the persons deriving title under him;

(d) under-lease includes an agreement for an under-lease where the under-lessee has become entitled to have his under-lease granted;

(e) under-lessee includes any person deriving title under an under-lessee.

161 The landlords submitted that the definition of 'lessee' did not mean that a notice must be served on every person who may bring him or herself within the definition. They adopted a submission advanced by RE Megarry QC (as he then was) in Church Commissioners for England v Ve-Ri-Best Manufacturing Co Ltd [48] to the effect that in the case of a lease, 'a notice must be served on the lessee; and in the case of an under-lease, on the under-lessee; in the case of a derivative under-lease, on the derivative under-lessee, and so on'. In other words, the party purporting to exercise the right of termination under a lease, under-lease or derivative under-lease must serve a notice on the party bound by that lease, under-lease or derivative under-lease. Thus, the landlords were only required to serve the notices of default on their lessee, the tenant.

162 The landlords extrapolated Primary's deployment of the extended definition of 'lessee' by analysing the consequence if the extended definition of 'lessor' was added to the mix. They submitted that the reasoning adopted by Primary would lead to illogical or absurd consequences. That analysis was designed to lend support to the landlords' reliance on the decision of the English Court of Appeal in Smith v Spaul,[49] in which Arden LJ acknowledged the broadness of the definition of 'lessee' in the relevant provision but added:

Although the expression 'the lessee' is defined in very wide terms in s 146(5)(b), the particular lessee required to be served under s 146(1) must be the person who vis-à-vis the lessor is bound to remedy a breach or to make compensation in money.

163 The disability faced by a sub-tenant, where a notice is served by the head lessor on the lessee/sub-lessor was acknowledged in Edgerton v Jones[50] where Green MR said:

Mr Denning said, and said truly, that if the ejectment action against Miss Jones had been carried to its conclusion, and the plaintiffs had re-entered, the mortgagees, as under-lessees, would have lost all right to apply for relief. That was settled as long ago as 1892, by a decision of this Court, in Rogers v Rice [1892] 2 Ch 170. But notwithstanding that decision, the Legislature did not think fit in 1925 to alter the law as there laid down. Accordingly, in the case of a mortgagee by sub-demise, that mortgagee is always at the risk of the lessor obtaining re-entry for breach of covenant without the mortgagee knowing anything about it; in which case the mortgagee is completely shut out. Every mortgagee, therefore, knows that that is the risk he runs. It, after taking a covenant from his mortgagor to observe the covenants in the lease, he takes no steps whatsoever to satisfy himself from time to time that no breach of covenant is taking place, he is always exposed to the risk that, behind his back and without his knowledge, the lessor will succeed in re-entering, and so determining the lease, with the result that all possibility of relief from forfeiture is lost to the mortgagee. That is one of the risks of the game.[51]

164 Different considerations may apply depending upon the terms of the lease agreement. But, in the absence of a contractual obligation to serve sub-lessees, the general position is, in my view, that a head lessor is not obliged to give a notice of default to a sub-tenant or mortgagee of a lease or others having an interest in the lease.[52]

165 In its statement of claim, Primary claimed relief from forfeiture of the leases should the court determine that any of the leases had been lawfully terminated. No grounds were given to support the claim. The landlords alleged in response, by way of defence, that Primary did not have the right to seek relief against forfeiture. They alleged that the operation of s 601FS and 601FT of the Corporations Act 2001 did not confer upon Primary the standing to make the application. It was not the tenant under the leases. They submitted that the jurisdiction conferred on a court to grant relief from forfeiture for breach of a covenant, other than to pay rent, was pursuant to s 146(2) of the Property Law Act. The landlords alleged in the alternative that if Primary did have standing, and if the court did have jurisdiction to grant relief, the application should be refused. At the threshold of Primary's application for relief against forfeiture was the operation of the relevant provisions of the Corporations Act.

166 Section 601FS of the Corporations Act provides:

Rights, obligations and liabilities of former Responsible Entity

(1) If the Responsible Entity of a registered scheme changes, the rights, obligations and liabilities of the former Responsible Entity in relation to the scheme become rights, obligations and liabilities of the new Responsible Entity.

(2) Despite subsection (1), the following rights and liabilities remain rights and liabilities of the former Responsible Entity:

(a) any right of the former Responsible Entity to be paid fees for the performance of its functions before it ceased to be the Responsible Entity; and

(b) any right of the former Responsible Entity to be indemnified for expenses it incurred before it ceased to be the Responsible Entity; and

(c) any right, obligation or liability that the former Responsible Entity had as a member of the scheme; and

(d) any liability for which the former Responsible Entity could not have been indemnified out of the scheme property if it had remained the scheme's Responsible Entity.

167 Section 601FT of the Corporations Act provides:

Effect of change of Responsible Entity on documents etc. to which former Responsible Entity is party

(1) If the Responsible Entity of a registered scheme changes, a document:

(a) to which the former Responsible Entity is a party, in which a reference is made to the former Responsible Entity, or under which the former Responsible Entity has acquired or incurred a right, obligation or liability, or might have acquired or incurred a right, obligation or liability if it had remained the Responsible Entity; and

(b) that is capable of having effect after the change;

has effect as if the new Responsible Entity (and not the former Responsible Entity) were a party to it, were referred to in it or had or might have acquired or incurred the right, obligation or liability under it.

(2) Subsection (1) does not apply to a right, obligation or liability that remains a right, obligation or liability of the former Responsible Entity because of subsection 601FS(2).

168 Primary alleged that as a consequence of its appointment as Responsible Entity for the 2007 Scheme, it became entitled to the 'rights, obligations and liabilities' of the tenant in relation to the 2007 Scheme. That much is obviously correct. It went on to submit that it had the right to attack the validity of the notices of default and termination, and to claim relief against forfeiture in the event that the terminations were upheld.

169 Primary relied on passages from the decision of Rares J in Huntley Management Ltd and Anor v Timbercorp Securities Ltd and ors.[53] In that proceeding, Timbercorp was the Responsible Entity for a number of managed investment schemes. While the product disclosure statements stated that the Responsible Entity, Timbercorp, would have ultimate responsibility for the operation and management of the project, the constitutions stated that each investor engaged Timbercorp 'in its personal capacity' to operate and manage the project. Timbercorp entered into three agreements with each investor who decided to participate in the project, and a lease for the property the subject of the project. Each of those documents was expressed to have been entered into by Timbercorp 'in its personal capacity'. When Timbercorp was replaced as Responsible Entity for each of the projects, a dispute arose between Timbercorp and the new Responsible Entity, Huntley, as to whether the documents were entered into by Timbercorp in its personal capacity or as Responsible Entity for the scheme. Huntley contended that the contracts were made by Timbercorp as Responsible Entity for the scheme, while Timbercorp contended that it had done so in its personal capacity. Rares J posed the critical question as 'what passed from Timbercorp to Huntley when it became the Responsible Entity of the 2005 project?' His Honour continued:

In Re Investa Properties Ltd [2001] NSWSC 1089; (2001) 187 ALR 462 at [11] Barrett J said that ss 601FS(1) and 601FT(1) were drafted in a particularly economical way but appeared to be intended "to cause an incoming responsible entity to step into the shoes of its predecessor". However, he observed that nowhere in Div 3 was there a reference to "property". And he suggested that Div 3 did not seem to affect a statutory form of vesting or assignment of property generally. Barrett J contrasted this with the provisions of s 601FC(2) that declared that the responsible entity holds scheme property on trust for scheme members. "Scheme property" and "property" are defined in s 9 as including contributions of money or money's worth to the scheme and any legal or equitable estate or interest, (present, future, vested or contingent) in real or personal property of any description (including a thing (or chose) in action) acquired directly or indirectly with the proceeds of such contributions of money or money's worth: Re Investa [2001] NSWSC 1089; 187 ALR 462 at [11]- [12]. Barrett J did not need to decide the question of the precise operation of ss 601FS and 601FT.

I agree with Barrett J's initial description of those sections as enabling the new responsible entity to step into the shoes of the old. Scheme property can be held in the name of a responsible entity in accordance with the provisions of the scheme. A trustee always has rights, obligations and liabilities, defined by the terms of the trust, in respect of trust property. I am of opinion that Div 3 of Pt 5C.2 provides for an automatic statutory novation in favour of the new responsible entity in respect of all rights, obligations and liabilities of its predecessor. The novation also applies to all contracts and any other documents to which the former responsible entity was a party (ss 601FS(1), 601FT(1)). The evident purpose of Div 3 is to facilitate a change of responsible entity occurring in such a way that the conduct of the scheme is not disrupted. Of course, ss 601FS(2) and 601FT(2) recognise that the former responsible entity retains any rights, obligations and liabilities that had accrued, or applied, to it prior to the change. The change in responsible entity becomes effective when ASIC's records name the new responsible entity in place of the former under s 601FJ. However, any property right requiring registration, such as in Torrens title land, held by the former responsible entity will vest in equity in the new responsible entity immediately on the creation of the new ASIC record by force of Div 3 of Pt 5C.2, but will only vest in law when it is registered (see s 1336(3)).

It is vital that the words "rights, obligations and liabilities" in Div 3 of Pt 5C.2 be given a broad construction so as to achieve the evident legislative purpose of facilitating an immediate and seamless change of the responsible entity of a scheme whenever ASIC records the new entity's name in its record of a registered scheme.

Timbercorp argued that the words "in relation to the scheme" in s 601FS(1) covered only rights arising from or forming part of the matrix of legal relationships making up the scheme, including those derived from its constitutional documents. It suggested that those words should not be given too broad a reach and that s 601FT(1), because it worked with s 601FS(1), was implicitly confined to documents concerning the scheme.

I reject that argument. The expression "in relation to" is of wide and general import and should not be read down in the absence of some compelling reason to do so: Fountain v Alexander [1982] HCA 16; (1982) 150 CLR 615 at 629 per Mason J. In Syncap Management (Rural) Australia Ltd v Lyford [2004] FCA 1352; (2004) 51 ACSR 223 at [46] RD Nicholson J held that "in relation to" as used in s 610FS(1) was an expression of wide import and signified no more than some relationship or connection. As Lindgren J noted, however, the rights, obligations and liabilities of the former responsible entity to which each of ss 601FS(1) and 601FT(1) apply, are impliedly limited to those capable of having an ongoing operation after the change in responsible entity: Re Huntley Management Ltd; Australian Olive Holdings Pty Ltd v Huntley Management Ltd (2009) 76 ACSR 256 at [85].

Ordinarily, the scheme would give the responsible entity a legal, and possibly a larger, right to hold scheme property, such as land, in its name. But, by force of ss 601FJ, 601FS(1) and 601FT(1) that right necessarily passes to the new responsible entity on a change becoming effective. In most cases one could expect that control and ownership of scheme property finds its ultimate source in the scheme constitution. Ordinarily, that will identify the basis on which scheme property is held by the responsible entity.

I am of opinion that ss 601FS(1) and 601FT(1) create a means of ensuring that rights to hold, and rights "in relation to", scheme property pass to and vest in the new responsible entity. This is because ss 601FJ, 601FS(1) and 601FT(1) cause all rights of the former responsible entity "in relation to the scheme" to pass to the new one once changed: cf City Pacific Ltd (in liq) v Ballandean Investments Pty Ltd [2010] QCA 113; (2010) 78 ACSR 110 at [23]- [26], per Holmes JA with whom McMurdo P and Chesterman JA agreed and Capelli v Shepard [2010] VSCA 2; (2010) 4 BFRA 210; 264 ALR 167 at [143], [148] per Dodds-Streeton and Mandie JJA and Byrne AJA; Treecorp Australia Ltd (in liq) v Dwyer [2009] FCA 278; (2009) 175 FCR 373[PDF] at [46], [48] per Gordon J. Likewise, those sections novate obligations and liabilities of the former responsible entity "in relation to scheme property" in the new responsible entity. The language of those provisions suggests that the Parliament had novation, not merely assignment, in mind: (1969) 120 CLR 365[PDF] at 388-391 per Windeyer J especially at 388; see too Goodridge v Macquarie Bank Ltd ; at - where I discussed the distinction between novation and assignment in contract.

Here, the statutory scheme in Div 3 of Ch 5C.2 is clearly intended to apply to a change of, and effect a transfer between, responsible entities in all situations so as to ensure that the incoming one has the fullest and most effective control of the whole of the scheme and scheme property at the instant that s 601FJ gives effect to the change. This will be achieved by giving a purposive and broad construction to the expression "in relation to the scheme" in applying ss 601FS and 601FT. [54]

170 The facts in the present case are complicated by the nature of the 'right' asserted by Primary. All leases have been terminated without opposition from the tenant, and the landlords have entered into contracts of sale for the land to a third party prior to Primary's application for relief. The issue in this part of the case is whether the Corporations Act provisions had the effect of transferring to Primary any 'right' that the tenant might have had to apply for relief against forfeiture. If the tenant's opportunity to make such an application was a 'right' capable of transfer by reason of the operation of the Corporations Act provisions, did such a right exist in the circumstances of this case?

171 The landlords submitted that even accepting the approach adopted by Rares J in Huntley, there was no 'right' to make any such application capable of transferring to Primary. But, if something in the nature of a right existed, the tenant would have been estopped from denying termination. The landlords also argued that the tenant's conduct would also preclude any right to seek relief against forfeiture, or would be a compelling factor against the grant of relief. Primary's response was to endeavour to isolate the tenant's conduct from Primary's position as an applicant for relief. It argued that it could not be held accountable for the tenant's conduct.

172 The landlords submitted that the right to make application for relief against forfeiture was not a 'right' that transferred under s 601FS. They submitted that it was a bare, unassignable, right to sue, and in the absence of clear words, should not be included amongst other well recognised rights of a Responsible Entity. They submitted that whatever be the scope of the word 'rights' in s 601FS, it did not include the bare right to litigate.

173 The landlords contrasted the use of the term 'rights' in s 601FS with other provisions in the Corporations Act, where that word was used and followed by words of expansion. The definitions of 'interest' and 'managed investment scheme' in s 9 are examples. They also referred to s 413(4) which provides,

"liabilities" includes duties of any description, including duties that are of a personal character or are incapable under the general law of being assigned or performed vicariously.

"property" includes rights and powers of any description, including rights and powers that are of a personal character and are incapable under the general law of being assigned or performed vicariously.

174 The definition of 'property', in the context of a provision to facilitate reconstruction and amalgamation of companies and groups, extended the concept of rights and powers in a manner which deliberately and expressly included rights and powers that were of a personal character, incapable under the general law of being assigned or performed vicariously. The landlords submitted that such an extension provided an example of what would be required to express a legislative intention that any right to make application for relief against forfeiture would transfer under s 601FS.

175 The landlords submitted that the jurisdiction exercised by the courts under s 146(2) of the Property Law Act and equivalent provisions was a statutory jurisdiction, investing only the person identified as 'the lessee' under a lease with an opportunity to seek the intervention of the court to grant relief against forfeiture. They submitted that the right was personal to the party against whom the lessor was 'proceeding'.

176 In the course of their submissions, the landlords argued that the leases were not 'scheme property', and for that reason any right to apply for relief against forfeiture, as a consequence of the termination of the lease, were not rights 'in relation to the scheme'. Even if it were the case that the leases were not 'scheme property', it would not necessarily follow that the tenant's interest in the leases were not rights 'in relation to the scheme'. There may be much to be said for the argument that in some cases a head lease may fall into a different category to a sub-lease granted to an investor in a managed investment scheme. But in my view there is no need to determine that question in this case. I am satisfied that the tenant's rights under the leases with the landlords fall within the general description of something 'in relation to the scheme'. Thus, prima facie, any rights, obligations and liabilities of the tenant in relation thereto became rights, obligations and liabilities of Primary.

177 When Primary assumed the role of Responsible Entity on 24 December 2010, the leases had been terminated. Primary might have argued that notwithstanding termination, the operation of s 601FT made it lessee under each terminated lease by its substitution for the tenant. Thus, Primary might have argued, it had all the rights of the tenant under the terminated leases, including the right to make application for relief against forfeiture.

178 To extend the scope of operation of s 601FS and 601FT, to substitute a new Responsible Entity as a party to a validly terminated agreement would, in my view, require clear words. Section 601FT should, in my view, be construed so as to confine its operation to operative agreements, extant at the time of the change in Responsible Entity. If there are rights after termination, they may be captured under s 601FS.

179 I am of the opinion that the opportunity to apply to the court for relief against forfeiture under s 146(2), and the related provisions in each State, is confined to the person against whom the 'lessor is proceeding, by action or otherwise, to enforce or has enforced without the aid of a court...' a right of re-entry or forfeiture. The landlords took no such step against Primary and the tenant took no step to obtain relief, and is not an applicant for relief in this proceeding. The extended meaning of 'lessee' in s 146(5) does not assist Primary. As Primary did not assume the position of lessee under the terminated leases, it is not in a position to rely upon s 146(2) to make its application.

180 As a separate limb to its case for valid termination, the landlords alleged, in paragraph 37(g) of their defence, facts and circumstances upon which they relied to raise an estoppel precluding the tenant and thus Primary from resiling from what they described as 'the intention assumption', to the effect that the tenant did not intend to remedy the breaches. The conduct relied upon by the landlords was the tenant's failure to make any application for relief following the services of the notices of default coupled with the public announcement by the receivers of the commencement of the sale process for the land, and the contracts entered into by the receivers for the sale of the land. In my opinion these facts disclose a clear basis for the estoppel, binding on the tenant, precluding it from denying termination. Such conduct would also have been relevant to any application for relief against forfeiture that the tenant might have made shortly before 24 December 2010.

181 If the tenant had deliberately refrained from making application for relief against forfeiture, permitting the landlords to enter into the contracts of sale, it would be a remarkable consequence of the legislation if, by reason of its appointment as replacement Responsible Entity, Primary was quarantined from that conduct. If the tenant's application for relief would have been compromised by reason of its conduct, why should any 'rights' assumed by Primary rise above the position of the tenant, as the previous Responsible Entity. I find that if and insofar as a right to make application under s 146(2) of the Property Law Act might have passed to Primary under ss 601FS or 601FT of the Corporations Act, any application by Primary for relief against forfeiture would be subject to any qualification to or limitations on the tenant's rights as existed shortly prior to 24 December 2010. Thus, Primary is estopped from denying termination of the leases and forestry agreements; and upon any application for relief against forfeiture, is fixed with tenant's conduct as a relevant factor to be taken into account by the court in the exercise of discretion.

182 Assuming that Primary is entitled to make application for relief against forfeiture by reason of its substitution as Responsible Entity, I would refuse relief.

183 Primary submitted that the application did not invoke the equitable jurisdiction of the court but was made pursuant to s 146(2) of the Property Law Act. It submitted that the ordinary equitable principles, such as requirement of 'clean hands' did not apply. Primary submitted, and it was not in dispute, that the court has a broad general discretion to grant relief against forfeiture, and may impose conditions. It submitted that each case would depend upon its own facts. In Beamer Pty Ltd v Star Lodge Supported Residential Services Pty Ltd; Najjar Special Accommodation Services Pty Ltd v Kimis Pty Ltd[55] Hollingworth J said:

1. The grant of this relief is not to be constrained by precedent.[56] Cases in this area generally turn on their particular circumstances.[57] The court will also take into account the general justice of the situation.[58]
2. What then are some of the relevant factors in exercising the discretion? The basis of equitable intervention in these cases is said to be relief against overreaching and unconscionable dealing.[59] The seminal judgment on relief against forfeiture is that of Lord Wilberforce in Shiloh Spinners Ltd v Harding:

It remains true today that equity expects men to carry out their bargains and will not let them buy their way out by uncovenanted payment. But it is consistent with these principles that we should reaffirm the rights 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 where 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. [60]

1. In Legione v Hateley, Mason and Deane JJ endorsed the view that when the equitable jurisdiction is invoked to relieve against forfeiture, equity looks to unconscionable conduct especially when unconscionable conduct is associated with fraud, mistake, accident or surprise.[61]
2. The test to be applied is one of unconscionability - that is, whether in the light of the tenant's remedying breach of covenant, resort by the landlord to the strict legal right of re-entry would be unconscionable.[62] Various cases illustrate that even if the breach is remediable because of its minor nature, it is not always unconscionable for a landlord to rely on its strict legal rights. The court must be satisfied in relieving against forfeiture that there is a reasonable expectation that the tenant will honour the lease obligations in the future. Certain circumstances may arise where the court cannot be so satisfied. In particular, the tenant may be guilty of "serious misconduct" beyond the breach of covenant. This being conduct of such gravity that, even accepting the default for which the right of re-entry as security has been satisfied, it would not be unconscionable on the landlord's part to insist on strict legal rights. [63]

I desire in the first instance to point out that the discretion given by the section is very wide. The Court is to consider all the circumstances and the conduct of the parties. Now it seems to me that when the Act is so expressed to provide a wide discretion, meaning, no doubt, to prevent one man from forfeiture what in fair dealing belongs to some one else, by taking advantage of a breach from which he is not commensurately and irreparably damaged, it is not advisable to lay down any rigid rules for guiding that discretion. I do not doubt that the rules enunciated by the Master of the Rolls in the present case are useful maxims in general, and that in general they reflect the point of view of which judges would regard an application for relief. But I think it ought to be distinctly understood that there may be cases in which any or all of them may be disregarded. If it were otherwise the free discretion given by the statute would be fettered by limitations which have nowhere been enacted. It is one thing to decide what is the true meaning of the language contained in an Act of Parliament. It is quite a different thing to place conditions upon a free discretion entrusted by statue to the Court where the conditions are not based upon statutory enactment at all. It is not safe, I think, to say that the Court must and will always insist upon certain things when the Act does not require them, and the facts of some unforeseen case may make the Court wish it had kept a free hand. [64]

185 Primary submitted that the discretion should not be exercised with any predilection against granting relief. That is no doubt correct. Primary accepted that a significant issue in the exercise of discretion was whether the essentials of the bargain can be secured for the landlord by remediation of the breach and the payment of compensation for loss flowing from the breach which is not remedied by performance. The landlords had submitted that relief against forfeiture, in the circumstances of this case, would impose upon them a new, different and prejudicial agreement. Primary submitted that the court would consider the comparative position of the parties including whether the landlords might obtain a windfall or a merit of benefit if relief were not granted. In Byron Bay Retirement Villages Pty Ltd v Zandatta Pty Ltd[65] Palmer J said:

1. The principles upon which such relief is granted are clear. The Court has regard to the nature and circumstances of the breach of lease committed, together with such damage as the lessor may suffer as a consequence of such breach, and also has regard to what the lessee stands to lose if the lease is forfeited. Where the forfeiture is excessively punitive as far as the lessee's breach is concerned, i.e. where the damage suffered by the lessor in consequence of the breach is far less in consequence than that which would be occasioned to the lessee if the lease were forfeited, or where the lessor would, if forfeiture were allowed, obtain a windfall or an unmerited benefit, then the Court usually grants relief against forfeiture: see, for example, Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406 at 429, per Gibbs CJ and Murphy J, and at 449, per Mason and Deane JJ.[66]

186 Primary submitted that where a statutory notice had been given, specifying a breach, the court cannot, in the absence of special circumstances, take account of other breaches not mentioned in the notice. The landlords accepted that general rule, but sought to argue that there were exceptional circumstances, such as the risk of fire in unmanaged plantations where fire prevention measures had not been adopted.

187 Primary submitted that the court should take into account the fact that the receivers had permitted the breaches to continue and impliedly consented to them taking no action to enforce the covenants from September 2009 until the service of the notices of default in 2010. Primary argued that it was unconscionable for the landlords to now rely upon the tenant's omissions and failure to rectify the breaches. This contention was a recasting of Primary's waiver allegation made in paragraph 5(b) of its reply and defence to counterclaim. I have already dealt with that allegation. There is no substance to the contention that the same conduct made it unconscionable for the landlords to rely upon the tenant's failure to rectify the breaches. Primary persistently overlooked the reality of the tenant's position following the collapse of the Group, and the circumstances in which it had failed to perform its obligations under the leases and forestry agreements, which continued after the notices of default had been served and until termination.

188 Primary submitted that the court should ignore the past conduct of the tenant, as lessee, in the exercise of its discretion. That conduct, of course, included that which the landlords relied upon to support the estoppel. I have rejected that submission. Primary argued that it had not committed the breaches, and had no obligation to remedy them until its appointment as Responsible Entity on 24 December 2010. Primary said that it had been unable to enter the land for the purpose of performing remediation works.

189 If Primary's contention that the court must overlook the conduct of the tenant once replaced as Responsible Entity is correct, such an approach would lead to absurd consequences. Selective timing in the appointment of a new Responsible Entity could invest the new entity with rights beyond those which the outgoing entity could exercise. To overlook the conduct of the tenant in the present case would be manifestly unfair to the landlords, who would be denied the opportunity to assert the facts upon which they rely to establish the estoppel, as a factor to be taken into account in the exercise of the court's discretion to grant relief against forfeiture. Primary would have the discretion artificially circumscribed.

190 The factors which the landlords contended militated against the grant of relief may be summarised as follows:

(1) The tenant ceased management activities in relation to the plantations with the collapse of the Group. Its position, publicly stated by the receivers and subsequently the liquidator, was that it did not have the funds to continue management of the plantations.

(2) When notices of default were ultimately served on the tenant it did nothing. There was no application for relief against forfeiture and no attempt to recommence management activities in relation to the plantations. The tenant did not contradict its earlier position namely, that it did not have the funds to undertake management activities.

(3) Following termination, the tenant made no application for relief against forfeiture.

(4) While it might be argued that Primary did not delay in bringing an application for relief against forfeiture, the failure of the tenant to make any such application following the service of notices of default, although explicable having regard to its financial position, should be taken into account as a factor militating against the grant of relief.

(5) Against a background of inaction by the tenant, the landlords commenced to undertake a sales process in respect of the land on 10 June 2010. On 17 December 2010 they entered into a contract of sale for the land. That contract was due for completion on 27 January 2010 but was delayed because of caveats lodged by Primary. The delay is causing substantial financial prejudice to the landlords.

(6) The grant of relief against forfeiture would have the effect of rewriting the commercial bargain between the landlords and the tenant. The rent payable under each lease is calculated as a percentage of the proceeds of sale of the trees at harvest. Primary is in effect 'cherry picking' plantations and leases for its restructured scheme.

(7) The financial capacity of Primary to undertake the restructured project, perform the necessary remediation works and achieve a return for investors is at best, uncertain. The plantations, as a whole, have only marginal viability and the likelihood is that the scheme will fail. Thus, the landlords will be tied to a tenant for perhaps 10 or 15 years, if renewal options are exercised, at a reduced rental.

(8) Some of the leases are for land used in schemes other than the 2007 Scheme for which Primary is now Responsible Entity. Thus, Primary's application for relief against forfeiture is based upon an interest in only part of the lease. Any application for relief against forfeiture, in such circumstances, must be an application made by all tenants. If and insofar as Primary may be taken to have a right to make application for relief against forfeiture, such right is confined to only those parts of the lease applied in the 2007 Scheme. The tenant is not an applicant in respect of the balance.

191 Primary adduced evidence of its financial capacity to undertake remediation works. At the time of the hearing it claimed to have $1.87million in cash at bank and $1.048 million in receiveables - funds payable to it by sub-lessees or continuing scheme members in respect of their woodlots. Primary also relied upon a working capital facility in the sum of $5 million under negotiation with Black Tree and the Bendigo and Adelaide Bank.

192 The landlords' challenge to the financial viability of the plantations, and thus the restructured scheme, had two principal objectives. First, to demonstrate that the restructured scheme would probably fail, so that there was no utility in granting relief against forfeiture; and second, to demonstrate prejudice to the landlords because of an anticipated reduction in rent.

193 Primary, on the advice of Black Tree, has already abandoned some plantations. It conceded that others may be abandoned in future. There was also a great deal of uncertainty about how the restructured scheme would be implemented. Not all scheme members continue to participate. Abandoned woodlots are to be reallocated, although the basis for reallocation was not clear. Scheme members have already lost a great deal of money and are effectively starting again. The landlords submitted that the uncertainty of the restructured scheme, when coupled with its uncertain financial viability, made it likely that the scheme would fail under the management of Primary and Black Tree.

194 There was a great deal of evidence directed to viability - that is, the likely financial outcome for investors. The evidence included competing assessments of the growth and productivity potential of the plantations and differing view about price and costs. Both sides presented experts who estimated returns by predicting harvest volumes, harvest costs, haulage costs and mill gate prices. Different financial models were advanced. The different outcomes depended in part upon differing predictions about future supply and demand in the market for paper and woodchips. Would China and Japan require more or less in 10 or 12 years? There were differing views about the impact of the past failure to manage the plantations, as well as differences over harvest and haulage costs and the cost of remediation.

195 Evidence going to the viability of the plantations, and the likely success of the restructured scheme to generate a profit for investors, involved a great deal of speculation. It is virtually impossible to reach any conclusion as to which, if any, of the various predictions is likely to be realised. I do not accept that a restructured scheme has no prospect of delivering a profitable outcome to investors. Presumably, Primary, Black Tree and the investors all hope for a profitable outcome, but recent history must surely temper their hope.

196 I do not, however, regard the financial prospects for a restructured scheme as a significant factor in the exercise of the discretion. Another relevant factor is the interest of the investors as sub-lessees, having already invested millions into the scheme. But the factors which, in my view, are most persuasive are the prior conduct of the tenant, including its failure to apply for relief and the other facts and the other circumstances relied upon by the landlords to support their estoppel claim. There is also the commercial impact of the proposed new scheme on the landlords.

197 Primary submitted that the impact on rental would be minimal, even if the scheme failed to perform according to expectations. That may be so, but there will be some impact, and it is very likely to be adverse to the landlords. They would be exposed to a new rent risk, not voluntarily undertaken. Primary proposes to carry on a restructured scheme on the landlords' land, in which only those plantations regarded as viable will be selected as scheme candidates. More plantations may be abandoned by Primary and Black Tree in the future. Why should the landlords be shackled to a new tenant, not of their own choosing, and a new uncertain scheme, with very different financial and management structures than the scheme into which they had leased their land? Their rental is tied to yield and price. That was so under the original scheme structure, but the difference now is that there are many less investors, and much less land under management. Only the best plantations have been selected.

198 The fortunes of the scheme are to now be managed by new entities, with whom the landlords did not choose to contract, and they regard as 'hostile'. Primary would have the landlords contracted under the same terms but with very different business risks. I do not think the landlords should be exposed to such significant changes to their commercial risks and relationships.

199 The significance of the multi-scheme leases arises at two levels in the present case. The landlords argued that if the notices of termination were ineffective, and the relevant leases remained on foot, Primary would only assume all of the rights, obligations and liabilities thereunder with a valid assignment from the tenant. Where, however, the leases have been validly terminated, the right which Primary asserted was a statutory right to make application for relief against forfeiture. For the multi-scheme leases, Primary purported to exercise that right over the whole of each relevant lease, having assumed responsibility for only part.

200 Leases in South Australia and Western Australia had been employed by the Group for the purpose of more than one scheme. The Western Australian properties were known as Dondy Downs, Eastwood 1, Eastwood 2, Maitland, McMahon, Anderson/Rocky Gully and Triangulee. The properties in South Australia were known as Talara and Lambert. Some of that land was employed for the purpose of a 2008 Scheme. Upon assuming the role of Responsible Entity of the 2007 Scheme, Primary did not assume rights, obligations and liabilities in relation to any other scheme.

201 The landlords submitted that any 'right' Primary might have had to apply for relief against forfeiture could not have been exercised in relation to the multi-scheme leases. They submitted that in the absence of an express statutory provision authorising such an application, the indivisibility of each lease created an insurmountable hurdle to any such application. It should be noted that Primary's application was made as if standing in the shoes of the tenant in respect of 'the lease'. It was not an application made on behalf of sub-tenants or investors.

202 The landlord submitted that the obligation to pay rent and other obligations were part of an entire agreement and were indivisible. They relied on the decision of Lindgren J, in Australian Olive Holdings Pty Ltd v Huntley Management Ltd.[67] The applicant, AOH, was a party to a contract for the supply of water to properties on which were conducted six managed investment schemes. The other parties to the contract were the Responsible Entity, Australian Olives Ltd, and the landowner. In about March or April 2008, Huntley replaced AOL as Responsible Entity for some of the schemes, and for the balance in November 2008. In between those dates, AOH commenced to invoice Huntley for a pro rata share of the contract price for the water in respect of the scheme over which Huntley had assumed control. Huntley refused to pay the invoices. AOH contended that Huntley had succeeded to the obligations under the contract of the previous Responsible Entity. Lindgren J held that the contract was indivisible and could not be re-written to facilitate the application of ss 601FS and 601FT of the Corporations Act. Lindgren J held:

In my opinion the CWSA (the water supply contract) is an "entire" agreement and does not accommodate an apportionment. There are several indications of this. First, there is the point made by Huntley that AOL could not, consistently with its contractual obligations, have reduced the amount of its liability by irrigating only certain Groves or Projects.

Second, there is the impracticability of different REs having access to Lot 11 and the Pumping Equipment and Reticulation Equipment on it (owned by AOL) to irrigate the different Projects for which they were hypothetically responsible.

Third, there are the references to "the Projects" (in the plural) in, for example, cl 7.1(a)(i) and the definition of "Land" in the Dictionary (Sch 1) as "the land from time to time on which Projects are established, excluding the Water Land." The references suggest all of the Projects and all of the Land as a whole.

Fourth, I construe the CWSA as providing for supply from the Lagoon, yet the evidence shows that it is not physically possible for all of the Projects in the Groves to be supplied from the Lagoon in equal measure. Projects 5 and 6 could not be irrigated from the Lagoon because there was no pipe work across Speers Creek to convey the water to those Projects. More precisely, the evidence was that of the land the subject of Projects 5 and 6, the Lagoon could irrigate only 18% of Project 5, because it is only that 18% that is on the north-western side (the Lagoon side) of Spiers Creek.

The CWSA is to be construed in the light of the physical environment to which it was directed, and in the light of the evidence just mentioned it would not have made sense for the parties to have agreed that the water from the Lagoon was to be treated as supplied on a per Project or per Grove basis when, generally speaking, water from the Lagoon could not irrigate certain Groves at all.

It will be noted that while this fourth point is relevant to the construction of the CWSA, even if severance was possible it would also militate against the per hectare formula adopted by AOHL.

For the above reasons it was not open to AOHL to sue Huntley on the basis of a liability to pay a pro rata part of a CPI-adjusted base fee of $1,490,000. [68]

203 Primary submitted that the leases allowed for a partial surrender of land in circumstances where the crop was not viable. Accordingly, it submitted, they were capable of division. Primary also relied on passages from the judgment of Rares J in Huntley Management Ltd v Timbercorp Securities Ltd.[69] The issue in that proceeding was the capacity in which the Responsible Entity had contracted. Rares J said, in relation to leases,

Four leases related to land leased both for the 2005 project and the 2006 project. Timbercorp argued that s 601FT could not affect its rights "in its personal capacity" in respect of those leases. It contended that one way of overcoming the difficulty so created was by Huntley purchasing the leases from Timbercorp.

However, this argument misunderstands the operation of s 601FT(1). The deeming that s 601FT(1) effects, makes the new responsible entity a party to the lease with the rights, obligations and liabilities of the former responsible entity in respect of the registered scheme. So, if Timbercorp had remained as responsible entity of the 2006 project after it had been replaced as responsible entity of the 2005 project by Huntley, both Timbercorp and Huntley would be lessees. Each would be a lessee in respect of the land used for the respective scheme of which it was the responsible entity. This construction is reinforced by Timbercorp's argument that Huntley could purchase Timbercorp's interest as lessee. That recognised that Timbercorp's real property interest in the lease, in its different capacities, was transferable. The construction of s 601FT(1) that I have arrived at is consistent with the interest of Timbercorp, in each lease and for each project, even though expressed as being "in its personal capacity", amounting to that of the responsible entity of a scheme. That interest is capable of being made over by the operation of the provisions of Div 3 of Pt 5C.2 to a new responsible entity after a change. [70]

204 The landlords submitted that the decision of Rares J was wrong, and that the decisions of Lindgren J and of the Full Court should be preferred. That is plainly correct if the decisions are incompatible, but in my opinion they are not. Under s 601FT, Huntley became a party to the water contract, but when it came to enforcement, the indivisible nature of the rights denied AOH the right to sue for a pro rata part of the fee referrable to the schemes for which the invoices had issued.

205 In the present case, assuming valid leases at the time Primary became Responsible Entity, Primary would become as a party to each lease in the place of the tenant. But that may not be of much assistance to Primary. The leases in the present case did not confer divisible rights on the tenant. The opportunity for a partial surrender, relied upon by Primary, was of no assistance. That was a contractual right expressly agreed between the parties. I have no doubt that the parties to a lease may contract so as to facilitate a division of rights, which would accommodate the replacement of the Responsible Entity in respect of some but not all schemes carried out on the land. The opportunity for partial surrender under the present leases did not go that far.

206 If the decision in Australian Olive Holdings is to be applied, one consequence would be that the landlords in the present case could not enforce indivisible obligations against Primary. Another consequence would be that any right to apply for relief against forfeiture could not be exercised for part only of the leased land. In my view, the right to make application for relief is indivisible. If Primary is correct, and it became lessee either because the leases were not terminated, or because it succeeded in an application for relief, it would became liable, as was the tenant, for all of the obligations in respect of the whole of each multi-scheme lease. Both outcomes would seem unpalatable, and manifestly unfair to one or other party.

207 While the existence of multi-scheme leases may not inhibit the operation of ss 601FS and 601FT, to place Primary in the position of the tenant, for the reasons given above, it does not have the effect of transferring a 'right' to apply for relief against forfeiture of a terminated lease. If those provisions did have that effect, the potential unfairness associated with such relief in this case is another good reason why relief should be refused in respect of the multi-scheme leases.

208 An issue identified by the parties was Primary's liability to pay compensation or damages for breach by the tenant. Primary's exposure to liability arose under the landlords' counterclaim, but was conditional on Primary having become entitled to rights as lessee or grantee under the leases and forestry agreements. That circumstance would arise if the terminations were held to be invalid for some reason, or if Primary succeeded in its application for relief against forfeiture. As neither event has occurred, the landlords' claims fall away. That said, however, if Primary were to succeed in its claim to replace the tenant as lessee or grantee, it would, in my view, be amenable to a claim for damages for breach. There is no reason in principle why Primary would not be liable for damages suffered by the landlords, if any, as a consequence of the breaches, as a 'liability' under s 601FS of the Corporations Act.

(1) The relevant provisions of each lease and forestry agreement were not so ambiguous or uncertain as to be unenforceable.

(2) The Tasmanian forestry agreements were amenable to s 15 of the Conveyancing and Law of Property Act 1884 (Tas).

(3) The notices of default complied with the requirements of s 146(1) of the Property Law Act (Vic) in respect of Victorian leases, and the corresponding statutory provisions in each other State.

(4) The notices of termination served by the landlords on the tenant were effective to terminate the leases and forestry agreements. Even if they were not, Primary is bound by the conduct of the tenant and estopped from contending that the leases were not terminated.

(5) Primary did not have standing to make an application under s 146(2) of the Property Law Act, and the corresponding provisions in each other State for relief against forfeiture. Even if it did having standing, I would refuse relief.

210 As a consequence, the claims made by Primary are dismissed and the landlords are entitled to an order that each of the caveats lodged by Primary to secure its claims be removed, and for possession of the land the subject of each lease and forestry agreement the subject of this proceeding.

A.2 Relevant Distinctions between those properties pursued by Primary in this proceeding

NPA ha of 2007 Plantation (based on FoRMs Database)

NPA ha of 2007 Plantation (based on FoRMs Database)

Annexure B - Date on which relevant land was acquired and date lease executed

Annexure C - Key dates for service of notices, expiry of notice periods, notices of re-entry and deregistration

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 23/06/10 at 2:22pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 15/07/10 at 8:35am;

(1) Registered post to level 5, 220 St Georges Terrace, Perth (registered office) dated 18/08/10

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 28/04/10 at 5:01pm - accepted by company secretary;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 17/06/10 at 3:15pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 28/04/10 at 5:01pm - accepted by company secretary;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 23/06/10 at 2:22pm;

(1) Registered post to level 5, 220 St Georges Terrace, Perth (registered office) dated 12/08/10 (taken to be received 17/08/10)

(1) Registered post to level 5, 220 St Georges Terrace, Perth (registered office) dated 20/09/10

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 28/04/10 at 5:01pm - accepted by company secretary;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 23/06/10 at 2:22pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 28/04/10 at 5:01pm - accepted by company secretary;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 17/06/10 at 3:15pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 28/04/10 at 5:01pm - accepted by company secretary;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 17/06/10 at 3:15pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 28/04/10 at 5:01pm - accepted by company secretary;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 17/06/10 at 3:15pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 19/05/10 at 3:02pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 23/06/10 at 2:22pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 08/07/10 at 10:15am;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 19/05/10 at 3:02pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 23/06/10 at 2:22pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 08/07/10 at 10:15am;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 12/07/10 at 3:35pm;

(1) Registered post to level 5, 220 St Georges Terrace, Perth (registered office) dated 18/08/10;

(1) Registered post to level 5, 220 St Georges Terrace, Perth (registered office) dated 25/08/10 (returned to sender 27/08/10)

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 28/04/10 at 5:01pm - accepted by company secretary;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 17/06/10 at 3:15pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 08/07/10 at 10:15am;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 28/04/10 at 5:01pm - accepted by company secretary;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 17/06/10 at 3:15pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 08/07/10 at 10:15am;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 28/04/10 at 5:01pm - accepted by company secretary;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 17/06/10 at 3:15pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 08/07/10 at 10:15am;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 3 May 2010 at 4:25pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 17/06/10 at 3:15pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 08/07/10 at 10:15am;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 28/04/10 at 5:01pm - accepted by company secretary;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 17/06/10 at 3:15pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 28/04/10 at 5:01pm - accepted by company secretary;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 17/06/10 at 3:15pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 28/04/10 at 5:01pm - accepted by company secretary;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 17/06/10 at 3:15pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 28/04/10 at 5:01pm - accepted by company secretary;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 17/06/10 at 3:15pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 28/04/10 at 5:01pm - accepted by company secretary;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 17/06/10 at 3:15pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 28/04/10 at 5:01pm - accepted by company secretary;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 17/06/10 at 3:15pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 28/04/10 at 5:01pm - accepted by company secretary;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 17/06/10 at 3:15pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 28/04/10 at 5:01pm - accepted by company secretary;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 17/06/10 at 3:15pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 28/04/10 at 5:01pm - accepted by company secretary;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 17/06/10 at 3:15pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 28/04/10 at 5:01pm - accepted by company secretary;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 17/06/10 at 3:15pm;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 28/04/10 at 5:01pm - accepted by company secretary;

(1) Delivery to level 5, 220 St Georges Terrace, Perth (registered office) on 17/06/10 at 3:15pm;

The Tenant is in breach of the Lease because it failed to tend and manage the Plantation Crop (as defined) in a proper and skilful manner in accordance with clause 6(b) as a result of the Tenant's failure to conduct appropriate:

(a) fertilisation of the Plantation Crop (as defined) in accordance with clause 6(b); and

(b) conduct appropriate weed control around the Plantation Crop (as defined) in accordance with clause 6(b).

The Lessee is in breach of the Lease because it failed to tend and manage the Plantation Crop in a proper and skilful manner in accordance with clause 6(b) as a result of the Lessee's failure to:

(a) establish portions of the Plantation Crop by failing to replant seedling trees where seedling trees have failed;

(b) conduct appropriate weed control of the Plantation Crop; and

(c) conduct foliar sampling and, where required, fertilise the Plantation Crop to address any nutritional deficiency.

The Tenant is in breach of the Lease because it has failed to tend and manage the Plantation Crop in a proper and skilful manner in accordance with clause 6(b) as a result of the Tenant's failure to conduct appropriate:

(a) maintenance fertilisation of the Plantation Crop; and

The Tenant is in breach of the Lease because it has failed to tend and manage the Plantation Crop in a proper and skilful manner in accordance with clause 6(b) by virtue of its failure to conduct appropriate foliar sampling and fertilisation of the Plantation Crop.

The Lessee is in breach of the Lease because it failed to conduct appropriate weed control around the Plantation Crop (as defined) in accordance with clause 6(b) and, in particular, failed to conduct second year weed control in relation to the 2007 Project timber or catch up second year weed control thereafter.

The Tenant is in breach of the Lease because it failed to tend and manage the Plantation Crop in a proper and skilful manner in accordance with clause 6(b) as a result of the Tenant's failure to conduct appropriate:

(a) foliar sampling and fertilisation of the Plantation Crop;

The Tenant is in breach of the Lease because it has failed to establish, tend and manage the Plantation Crop in a proper and skilful manner as required by clause 6(b), by virtue of its failure to properly establish the Plantation Crop by planting seedlings in areas where an in-fill programme is appropriate (as a result of fire).

The Tenant is in breach of the Lease because it failed to tend and manage the Plantation Crop in a proper and skilful manner in accordance with clause 6(b) as a result of the Tenant's failure to:

(a) conduct adequate weed control in respect of part of the Plantation Crop, including to spray herbicides and pesticides on the Plantation Crop; and

The Tenant is in breach of the Lease because it failed to tend and manage the Plantation Crop in a proper and skilful manner in accordance with clause 6(b) by virtue of the Tenant's failure to conduct appropriate:

(a) foliar sampling and fertilising of the Plantation Crop; and

(b) proper weed control in respect of part of the Plantation Crop.

In breach of clause 6(b), the Tenant has failed to tend and manage the Plantation Crop in a proper and skilful manner by virtue of its failure to:

(i) establish and/or tend to portions of the Plantation Crop as a result of omitting to replant seedling trees following failures of the Plantation Crop;

(ii) conduct appropriate weed control of the Plantation Crop;

(iii) conduct appropriate insect control, including the spraying of insecticides; and

(iv) conduct appropriate foliar sampling and maintenance fertilisation of the Plantation Crop.

In breach of clause 6(b), the Tenant has failed to tend and manage the Plantation Crop in a proper and skilful manner by virtue of its failure to:

(i) establish and/or tend to portions of the Plantation Crop as a result of omitting to replant seedling trees following failures of the Plantation Crop;

(ii) conduct appropriate weed control of the Plantation Crop;

(iii) conduct appropriate insect control, including the spraying of insecticides; and

(iv) conduct appropriate foliar sampling and maintenance fertilisation of the Plantation Crop.

The Lessee is in breach of the Lease because it failed to tend and manage the Plantation Crop in a proper and skilful manner in accordance with clause 6(b) as a result of the Lessee's failure to conduct appropriate:

(i) foliar sampling and fertilising of the Plantation Crop to address any nutritional deficiencies; and

(ii) weed control of the Plantation Crop, including inter-row treatment of the Leased Land.

The Tenant is in breach of the Lease because it failed to tend and manage the Plantation Crop in a proper and skilful manner in accordance with clause 6(b) by virtue of a failure to:

(i) establish and/or tend the Plantation Crop by failing to replant seedling trees where trees have failed;

(ii) conduct appropriate weed control, in particular in the inter-rows; and

(iii) conduct foliar sampling and fertilising of the Plantation Crop post-establishment.

The Tenant is in breach of the Lease because it failed to tend and manage the Plantation Crop in a proper and skilful manner in accordance with clause 6(b) by virtue of a failure to conduct appropriate:

(i) weed control around the Plantation Crop, including in inter rows; and

(ii) foliar sampling and maintenance fertilising of the Plantation Crop.

The Tenant is in breach of the Lease because it failed to tend and manage the Plantation Crop in a proper and skilful manner in accordance with clause 6(b) by virtue of a failure to:

(i) establish and/or tend to portions of the Plantation Crop as a result of failing to replant seedling trees where portions of the Plantation Crop have failed;

(ii) conduct appropriate foliar sampling and maintenance fertilising of the Plantation Crop; and

(iii) conduct appropriate weed control around the Plantation Crop, including the inter rows.

The Tenant is in breach of the Lease because it failed to tend and manage the Plantation Crop in a proper and skilful manner in accordance with clause 6(b) by virtue of a failure to conduct appropriate:

(i) weed control around the Plantation Crop, including the inter rows; and

(ii) foliar sampling and fertilising of the Plantation Crop.

The Tenant is in breach of the Lease because it failed to establish, tend and manage the Plantation Crop in a proper and skilful manner in accordance with clause 6(b) by virtue of failure to conduct appropriate:

(a) replanting of seedling trees (in fill programme) where seedling trees have failed; and

The Tenant is in breach of the Lease because it failed to tend and manage the Plantation Crop in a proper and skilful manner in accordance with clause 6(b) by virtue of a failure to conduct appropriate:

(a) replanting of seedling trees (in fill program) after seedling trees failed;

The Tenant is in breach of the Lease because it failed to establish, tend and manage the Plantation Crop in a proper and skilful manner in accordance with clause 6(b) by virtue of its failure to:

(a) establish and/or tend portions of the Plantation Crop as a result of failing to replant areas with seedling trees where seedling trees have failed; and

In breach of clause 6(b), the Tenant has failed to spray herbicides and thereby has failed to tend and manage the Plantation Crop in a proper and skilful manner.

The Tenant is in breach of the Lease because it failed to establish, tend and manage the Plantation Crop in a proper and skilful manner in accordance with clause 6(b) by virtue of a failure to:

(a) establish and/or tend to portions of the Plantation Crop by replanting the area with seedling trees where the Plantation Crop has died;

(b) conduct appropriate foliar sampling and fertilising of the Plantation Crop; and

(c) conduct appropriate weed control of the Plantation Crop.

The Tenant is in breach of the Lease because it failed to tend and manage the Plantation Crop in a proper and skilful manner in accordance with clause 6(b) by virtue of a failure to conduct appropriate weed control of the Plantation Crop, including in the inter rows.

The Tenant is in breach of the Lease because the Tenant has failed to establish, tend and manage the Plantation Crop in a proper and skilful manner by virtue of its failure to:

(i) treat existing coppice at the time the plantation was replanted by applying herbicides to the coppice, resulting in the destruction of coppice;

(ii) adequately establish the Plantation Crop in accordance with clause 6(b), by virtue of a failure to conduct an in fill programme; and

(iii) thin the coppice growth so as to prevent replanted stock from being dominated by coppicing trees in accordance with clause 6(b); and

(b) in breach of clause 6(f), undertake remedial erosion work to prevent land degradation.

The Tenant is in breach of the Lease because it failed to tend and manage the Plantation Crop in a proper and skilful manner in accordance with clause 6(b) by virtue of a failure to conduct appropriate:

(a) replanting of seedling trees (in fill programme) where seedling trees failed;

The Grantee is in breach of the Forestry Right Instrument because it has failed to tend and manage portions of the Plantation Crop in a proper and skilful manner in accordance with clause 6(b) by virtue of a failure to:

(i) establish portions of the Plantation Crop, by failing to replant seedling trees where seedlings trees failed;

(ii) conduct appropriate weed control, particularly in inter-rows; and

(iii) conduct appropriate foliar sampling and maintenance fertilising of the Plantation Crop.

The Grantee is in breach of the Forestry Right Instrument because it has failed to tend and manage the Plantation Crop in a proper and skilful manner in accordance with clause 6(b) by virtue of a failure to conduct appropriate:

(ii) foliar sampling and fertilising of the Plantation Crop.

The Grantee is in breach of the Forestry Right Instrument because it has failed to tend and manage portions of the Plantation Crop in a proper and skilful manner in accordance with clause 6(b) by virtue of a failure to:

(i) establish portions of the Plantation Crop, by failing to replant seedling trees where seedlings trees failed;

(ii) conduct appropriate weed control, particularly in inter-rows; and

(iii) conduct appropriate foliar sampling and maintenance fertilising of the Plantation Crop.

[1] See cl 6(b) of each lease and forestry agreement.

[2] [1988] 15 NSWLR 130.

[4] [2010] NSWCA 268, [307]-[324].

[5] [1897] 1 Ch 271, 274.

[6] [1916] 1 AC 1, 17.

[7] [1985] HCA 14; (1985) 157 CLR 17, 34.

[8] [2010] NSWCA 24, [44].

[9] Natwest Markets Australia Pty Ltd v Tenth Vandy Pty Ltd [2008] VSCA 207; (2008) 21 VR 68 at [34]; By way of example, s 146(13) of the Property Law Act 1958 (Vic) provides, "This section shall have effect notwithstanding any stipulation to the contrary ..."

[10] Fletcher v Nokes, supra, at 274; Fox v Jolly, supra, at 17-18; Progressive Mailing House v Tabali, supra, at 34; Re Riggs [1901] 2 KB 16, 20; Gee v Harwood [1933] 1 Ch 712, 722; Plymouth Corporation v Harvey [1971] 1 WLR 549, 553-4.

[11] Penton v Barnett [1898] 1 QB 276, 281; Gerrarty v McGavin [1914] HCA 23; (1914) 18 CLR 152, 159; Fletcher v Nokes, supra; Fox v Jolly, supra; Horsey Estates Ltd v Steiger [1899] 2 QB 79, 91.

[12] Penton v Barnett [1898] 1 QB 276, 281.

[13] [1959] HCA 45; (1959) 101 CLR 209, 222.

[14] Western Australia v Ward [2002] HCA 28; (2002) 213 CLR 1, [502], [507], [511]-[512].

[15] [2010] NSWCA 268.

[17] [1916] AC 1.

[21] Ex parte Daly-Watkins re Wilson (1955) 72 WN(NSW) 454, 456 (Street CJ).

[22] [1914] 2 KB 109, 127-8.

[23] [1997] UKHL 19; [1997] AC 749.

[26] Hexton Holdings Ltd v AHC Westlink Ltd [2010] EWHC 1280; Akici v LR Butlan Ltd [2005] EWCA Civ 1296; [2006] 1WLR 201.

[27] Locke v Pierce [1893] 2 Ch 271, 276; Skinner's Company v Knight [1891] 2 QB 542, 544-5; Lowe v Ellbogen [1959] NZLR 103, 106.

[28] [2006] IEHC 200, 38.

[29] [2010] NSWCA 268, [325]-[326].

[31] [1899] 2 QB 79.

[34] See generally, Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2010] NSWSC 29, [375].

[35] [1916] 1 AC 1.

[37] [2007] QCA 454.

[39] [1991] UKHL 7; [1992] 1 AC 494.

[46] (1948) 48 SR (NSW) 417, 426.

[48] [1957] 1 QB 238, 242.

[49] [2002] EWCA Civ 1830; [2003] 1 All ER 509.

[50] (1939) 2 KB 702.

[52] See generally Adrian J Bradbrook and Clyde E. Croft, Commercial Tenancy Law in Australia (Butterworths, 3rd revised ed, 2008); Halsbury's Laws of England (3rd ed), vol 27(2) [515], nn 7; Church Commissioners for England v Ve-Ri-Best Manufacturing Co Ltd [1957] QB 238.

[53] [2010] FCA 576; (2010) 187 FCR 151.

[55] [2005] VSC 236.

[56] Hyman v Rose [1912] AC 623, 631.

[57] Hyman v Rose [1912] AC 691 at 721-725 at 631 (Earl Loreburn LC) (HL).

[58] Chan v Cresdon Pty Ltd [1989] HCA 63; (1989) 168 CLR 242, 254-255.

[59] JD Heydon and PL Loughlan, Equity and Trusts (6th ed), 349.

[60] [1973] AC 691, 721-725.

[61] [1983] HCA 11; (1983) 152 CLR 406, 444.

[62] Leads Plus Pty Ltd v Kowho Intercontinental Pty Ltd (2000) 10 BPR 18, 085.

[63] [2005] VSC 236, [439]-[442]; Tannous v Cipolla Bros Holdings Pty Ltd (2002) NSW V Conv R 56-001, 58,245 at 58,249 (Barrett J).

[64] Hyman v Rose [1912] AC 623, 631.

[65] (2008) NSWSC 1123.

[67] [2009] FCA 1479; [2010] FCAFC 76.

[68] [2009] FCA 1479 [114] - [120].

[69] [2010] FCA 576.