Progressive Mailing House Pty Ltd v Tabali Pty Ltd

Part 10 of the memorandum of lease was headed " Default, Termination etc.". Clause 10.1, so far as it may be relevant, provided:

(a) any rent or any other moneys payable under this lease shall remain unpaid for fourteen (14) days next after the date appointed for payment thereof (although no formal or legal demand shall have been made therefor) or;

(b) the Lessee being a company, an order is made or a resolution is effectively passed for the winding up of the Lessee (other than for the purposes of reconstruction or amalgamation) or ceases or threatens to cease to carry on business; or

(c) the Lessee fails to perform or observe any one or more of the covenants or provisions on the part of the Lessee expressed or implied in this lease and the Lessee fails to remedy same after thirty (30) days' notice to rectify from the Lessor unless the non-performance or non-observance has been waived or excused by the Lessor in writing;

then the Lessor may at any time thereafter but without prejudice to any claim which the Lessor may have against the Lessee in respect of any breach of the covenants and provisions in this Lease on the part of the Lessee to be observed or performed either re-enter into and repossess and enjoy the Demised Premises as of its former estate (anything herein contained to the contrary notwithstanding) and thereupon this Lease shall absolutely determine, or call for an immediate surrender of the Lessee's estate and interest under this Lease and for the more effectual enforcement of this right the Lessee hereby irrevocably appoints the Lessor its true and lawful attorney to surrender or cause to be surrendered this Lease and to sign all notices deeds and documents for the purpose of such surrender in the name of the Lessee, and upon such surrender the Lessor shall be freed and discharged from any action suit claim or demand by or obligation to the Lessee under or by virtue of this Lease. Clause 10.2 is not material. Clause 10.3 provided for interest where rent or other moneys payable by the lessee were in arrears for fourteen days.

Part 11 dealt with a number of general matters. Clause 11.4 contained a provision that the lease was conditional upon the approval by the local municipal council of a development application for use of the premises within the terms of the purpose clause. Clause 11.6 provided:

The Lessor shall within twelve (12) weeks from the date of such development approval in accordance with the requirements of the requisite authorities carry out the work specified in the Second Schedule hereto. The Lessee shall take occupation of the Demised Premises fourteen (14) days after receipt of notice in writing from the Lessor or its Solicitors that the said work has, in the opinion of the Lessor's architect been completed. The second schedule referred to a number of itemized works to be undertaken. Clause 11.7 then provided: Notwithstanding the provisions of the First Schedule hereto the first payment of rent as therein referred to shall be payable at the expiration of two (2) months from expiration of the fourteen-day period referred to in Clause 11.6 hereof.

Notwithstanding the provisions of cl. 11.6 as regards the occupation of the premises, the appellant actually entered into occupation prior to the date of the memorandum of lease. The development approval referred to in cl. 11.4 was given on 24 August 1978. Thereafter certain work was done and a notice, dated 20 November 1978, was given by the respondent in purported compliance with cl. 11.6, to the effect that the work specified in the second schedule had in the opinion of the respondent's architect been completed and that the appellant's "formal occupation" of the premises would commence fourteen days from that date.

From the beginning the relationship of the parties was strained, as is evidenced by the correspondence between their solicitors. On 12 January 1979 the solicitors for the appellant wrote to the solicitors for the respondent detailing a number of perceived defects in the work carried out on the premises, requesting evidence of the approval by the council of the development application and raising a query with regard to rent in the light of a report stating the total area of the premises to be slightly less than previously thought. The letter stated that in the circumstances the appellant did not accept that the respondent's notice was properly given and that payments of rent should commence on 4 February 1979. The respondent's solicitors replied by letter of 22 January 1979 claiming the work required by the memorandum of lease to have been properly carried out as evidenced by the architect's certification and dealing with the other matters raised in the earlier letter. It stated that, in accordance with the notice given, the appellant was required to commence rent payments on 4 February 1979. The appellant's solicitors wrote again on 6 February 1979 disputing that the work was properly carried out and continuing:

In view of the above, the lessee is not prepared to accept that the architect has properly certified and accordingly no obligation arises for the payment of rent to be made to which you refer. However, as a sign of goodwill, and in the hope that your client will complete its obligations in relation to the work to be carried out on the premises, our client is prepared, without prejudice, to release the funds invested in the New South Wales Permanent Building Society on account of the first month's rent when that payment ultimately becomes due.

The appellant paid the rent in the months of February, March, April and May 1979, notwithstanding the dispute. The appellant then ceased to pay rent and made no payment until October 1979.

On 8 August 1979 the respondent commenced proceedings in the Supreme Court of New South Wales for a declaration that the appellant was bound to pay rent as from 4 February 1979. The appellant filed a cross-claim. Subsequently, on 11 October 1979, the respondent commenced the action out of which this appeal arises. By its statement of claim in this action the respondent pleaded the memorandum of lease, the appellant's entry into possession, a number of the lessee's covenants (including those in cll. 3.1, 4.2 and 5.2), cl. 10.1, the non-payment of rent since 11 May 1979, that by notice dated 16 August 1979 the respondent had given the appellant notification of breaches of the lease requiring them to be remedied and that the appellant had neglected or refused to do so. The respondent sought an order for possession, leave to issue a writ of possession, judgment for outstanding rent and interest pursuant to cl. 10.3, mesne profits and damages and interest.

The appellant by its defence denied the breaches of the lease and the failure to rectify them. The appellant pleaded that it was a condition precedent of the lease coming into operation that the respondent was to carry out certain work on the premises which had not been carried out and denied that the payments made were payments of rent. It further alleged that cl. 11.6 of the lease was not complied with so that by virtue of cl. 11.7 the time for the payment of rent could not be determined and, accordingly, the appellant was not in default under the covenant to pay rent. The appellant further claimed that certain alleged breaches were consented to by the respondent. The appellant also sought relief against forfeiture of the lease.

The primary judge noted that, although the memorandum of lease was not registered, both parties ultimately agreed that the matter could be considered on the basis that it was so registered and that the appropriate orders or consents for that purpose would be effected. He observed that the document "plainly contains the agreement between the parties".

His Honour rejected the appellant's submission, centred on cll. 11.6 and 11.7, that those clauses raised a condition precedent to the obligation of the appellant under the memorandum of lease to take occupation and thereafter to pay rent. The second element in this submission was that the notice dated 20 November 1978 given by the respondent was not given by an architect but by an engineer. The consequence of this submission, if accepted, was that the notice was deficient and that, in the absence of a valid notice, the date of occupation was not fixed, so that it was not possible to determine the date of the first payment of rent under cl. 11.7. According to the appellant, the argument led to the conclusion that no rent was payable under the lease. It was, however, conceded that, though rent was not payable, liability by way of use and occupation or mesne profits could arise.

The primary judge held that the appellant's argument "ignored the circumstance that the events upon which it was based had preceded the date of the commencement of the lease" and that cl. 11 only operated from 4 December 1978 and that it was intended as a means of fixing a period for occupation thereafter. As the appellant was already in occupation on that date, the two clauses were inapplicable, so that the provisions of cl. 3, containing the covenant to pay rent, applied.

His Honour then held that the appellant was in breach of the covenant to pay rent and in breach of the covenant to maintain and repair and that the breaches had not been rectified. He rejected the appellant's case for relief against forfeiture, observing that the breach of the covenant to pay the rent was in respect of a substantial amount and had been persisted in over a long period. Moreover, he found that in various respects the appellant's breaches of the covenant to maintain and repair and the covenant against sub-letting had shown a disregard on the part of the appellant for the premises and for the respondent's interest in them.

His Honour, following the majority decision of the Court of Appeal in Shevill v. Builders' Licensing Board, a decision which was later reversed in this Court [1] , concluded that, although a lessor could not recover rent after forfeiture, he could recover damages for loss of the benefit of the covenant to pay rent. Assuming that a period of six months approximately would elapse before the respondent would succeed in reletting the premises, his Honour awarded $85,000 damages for breach of the covenants to pay rent and to pay outgoings.

In the Court of Appeal Hutley J.A. (with whom Reynolds J.A. agreed) saw the issue in the appeal in these terms:

what is the proper way to assess the damages of the plaintiff who has a contract to grant a lease for a term which is required to be registered under the Real Property Act for the term to be constituted and who terminates the contract because of acts which, if the term existed, would justify the forfeiture of the term under circumstances against which equity would not relieve. The appellant, by its conduct, has caused the respondent to re-enter under circumstances that it is exempted from granting the term which it has contracted to grant and is compelled to re-let the premises in order to mitigate the damages. According to his Honour, the case was conducted on the basis that the respondent had to show a breach of a fundamental term or that the appellant had abandoned the contract. He considered that the respondent's right to damages was grounded on a termination of the right to the term, brought about by conduct of the appellant which caused consequential loss to the respondent. He concluded that there was no error in the assessment of damages by the primary judge.

Glass J.A. was of the same opinion, though he preferred to say that, when considered in the evidentiary context, the findings by the primary judge amounted to a finding of substantial breach by the appellant of essential obligations which bound him and entitled the respondent to rescind the agreement and sue for damages. He found it unnecessary to determine the issue of renunciation.

In the first instance it is necessary to examine the legal consequences of the failure to register the memorandum of lease. At common law where there was an agreement for lease but no demise, either because the agreement was expressed as an executory contract or consisted of an intended demise for more than three years which was void under ss. 2 and 3 of the Statute of Frauds because it was not under seal, the intended lessee upon entering into possession became a tenant at will and upon payment of rent became a tenant from year to year. The tenancy thereby created had the following characteristics: (1) the terms and conditions of the agreement, save in so far as they were inconsistent with a tenancy from year to year, applied to it; and (2) the tenancy from year to year continued only during the term contracted for, and expired at the end of that term by effluxion of time without notice to quit, being in the meantime liable to a sooner determination by notice to quit: see Moore v. Dimond [2] ; Carberry v. Gardiner [3] .

1. (1929) 43 C.L.R. 105, at pp. 112-114. 2. (1936) 36 S.R. (N.S.W.) 559, at pp. 567-568.

By s. 127(1) of the Conveyancing Act 1919 N.S.W., as amended, it is provided that no tenancy from year to year shall be implied by payment of rent and that if there is a tenancy and no agreement as to its duration then it shall be deemed to be a tenancy determinable by either party by one month's notice in writing expiring at any time.

In equity, however, a written lease not under seal was regarded as evidencing an agreement for lease. As an agreement for lease was capable of specific performance equity would decree specific performance of the written lease by ordering the execution of a lease under seal. In the meantime, in accordance with the doctrine of Walsh v. Lonsdale [4] , the relationship between the parties in equity was that of landlord and tenant: Carberry v. Gardiner [5] . The landlord could, if necessary, be restrained by injunction from acting on the footing that the other party was merely a tenant at will or a tenant from year to year: Walsh v. Lonsdale; Dockrill v. Cavanagh [6] . It was otherwise where the agreement had been terminated. Then equity would not allow one party to allege that any tenancy, even a tenancy at common law, existed: Dimond v. Moore [7] .

1. (1882) 21 Ch.D. 9. 2. (1936) 36 S.R. (N.S.W.), at p. 569. 3. (1944) 45 S.R. (N.S.W.) 78, at p. 83. 4. (1931) 45 C.L.R. 159.

An understanding of the position as it now obtains in New South Wales, following the enactment of the Supreme Court Act 1970 N.S.W., may be gleaned from the observations of Jordan C.J. in Dockrill v. Cavanagh. His Honour said [6] :

After the passing in England of the Judicature Acts, which invested the superior courts with jurisdiction in both equity and common law, it was held that in a court which possessed the combined jurisdictions (although not in a court which had only a common law jurisdiction: Foster v. Reeves [9] ), a party to an agreement for a lease, if the lease was specifically enforceable (but not if it was not; Coatsworth v. Johnson [10] ; Inland Revenue Commissioners v. Derby [11] ), could obtain against the other all the remedies which would be available to him if a proper lease had actually been executed: Walsh v. Lonsdale, although the agreement was not thereby converted into an actual lease: Borman v. Griffith [12] . 1. (1944) 45 S.R. (N.S.W.) 78, at p. 83. 2. [1892] 2 Q.B. 255. 3. (1886) 54 L.T. 520. 4. [1914] 3 K.B. 1186. 5. [1930] 1 Ch. 493, at pp. 497-498.

In National Trustees, Executors and Agency Co. of Australasia Ltd. v. Boyd [13] the High Court held that a lease for a term of seven years which was not registered as required by s. 61 of the Transfer of Land Act 1915 Vict. was effective to give the lessee an equitable lease for seven years and was a good defence to an action by the successors in title of the lessor to recover possession of the premises. Knox C.J., Gavan Duffy and Rich JJ., having said that the real argument before them was that the instrument, for want of registration, could operate only as a contract and not as a lease binding the remainder, continued [14] :

The simple answer is that it operates, not merely to create contractual rights and duties, but to create an equitable term of years and a tenure by estoppel between the lessor and her privies and the lessee. 1. (1926) 39 C.L.R. 72. 2. (1926) 39 C.L.R., at p. 82.

I should prefer to say that the equitable term arises by virtue of the doctrine in Walsh v. Lonsdale and the maxim that equity considers as done what ought to be done, rather than by reference to the doctrine of estoppel. That was the approach taken in York House Pty Ltd. v. Federal Commissioner of Taxation [15] . And it is an approach which accords with the comprehensive explanation given by Jordan C.J. in Carberry v. Gardiner, Dockrill v. Cavanagh, and in Australian Provincial Assurance Ltd. v. Rogers [16] .

1. (1930) 43 C.L.R. 427, at pp. 435-436. 2. (1943) 43 S.R. (N.S.W.) 202, at pp. 205-206.

It follows that the rights of the parties in the present case are to be determined on the footing that as between them, notwithstanding the failure to register the memorandum of lease, it brought into existence an equitable term of the duration which it specified and subject to the conditions which it contained. The question which arises is the extent, if at all, to which the relevant rights, duties and liabilities of the parties to the memorandum of lease fall to be determined by reference to the ordinary principles of contract law.

In Shevill [17] Gibbs C.J. assumed, without deciding, that the ordinary principles of contract law, so far as they are relevant to the questions that arose in that case, applied to leases. He acknowledged that a contrary view had been expressed in Total Oil Great Britain Ltd. v. Thompson Garages (Biggin Hill) Ltd. [18] , where the English Court of Appeal held that the principle that acceptance of a repudiation brings a contract to an end had no application to a lease because the lease was more than a contract - it created an estate or interest in land. The consequence in that case was that the lessee's claim that the lease for a term had been terminated by the lessee's acceptance of conduct of the lessor amounting to a repudiation failed. Lord Denning M.R. [19] (with whom Edmund Davies and Stephenson L.JJ. agreed) placed some reliance on the opinion expressed by Lord Russell of Killowen and Lord Goddard in Cricklewood Property and Investment Trust Ltd. v. Leighton's Investment Trust Ltd. [20] that frustration does not bring a lease to an end. However, recently in National Carriers Ltd. v. Panalpina (Northern) Ltd. [21] , the House of Lords held that the doctrine of frustration was in principle applicable to leases. Lord Wilberforce and Lord Simon of Glaisdale pointed out [22] that both in the United States and in Canada it had been accepted that a lease might be terminated by frustration - see Williston on Contracts, 3rd ed. (1978), vol. 18, s1955; Corbin on Contracts (1962), s1356; Highway Properties Ltd. v. Kelly, Douglas & Co. Ltd. [23] . Their Lordships quoted the following passage from the judgment of Laskin J. in the last-mentioned decision (36):

It is no longer sensible to pretend that a commercial lease, such as the one before this Court, is simply a conveyance and not also a contract. It is equally untenable to persist in denying resort to the full armoury of remedies ordinarily available to redress repudiation of covenants, merely because the covenants may be associated with an estate in land. 1. (1982) 149 C.L.R., at p. 625. 2. [1972] 1 Q.B. 318. 3. [1972] 1 Q.B., at p. 324. 4. [1945] A.C. 221, at pp. 234, 244. 5. [1981] A.C. 675. 6. [1981] A.C., at pp. 695-696, 702-703. 7. (1971) 17 D.L.R. (3d) 710, at p. 721.

Laskin J. drew attention to the decision of this Court in Buchanan v. Byrnes [24] where it was decided that upon abandonment by a tenant, in breach of covenant, of a hotel property the subject of a lease for fifteen years, the landlord was entitled to claim damages over the unexpired term of the lease. In Buchanan [25] Barton J. said:

There was at that time a renunciation which, at the plaintiff's option, amounted to a breach of the covenants that throughout the term he would carry on a licensed victualler's business upon the premises and keep them open and in use as an inn, &c., and of the covenant not to do anything which might entail forfeiture of the licence (Licensing Act 1885, s. 101), as well as of the subsidiary covenants. The plaintiff was then entitled to claim in an immediate action, prospectively, such damages as would be caused by a breach at the appointed time, subject to any circumstances which which might operate in mitigation of damages See also per Griffith C.J. [26] . 1. (1906) 3 C.L.R. 704. 2. (1906) 3 C.L.R., at p. 719. 3. (1906) 3 C.L.R., at p. 714.

Although Knox C.J. and Gavan Duffy J. in Firth v. Halloran [27] held that the doctrine of frustration did not apply to leases, Isaacs J. [28] was of the contrary opinion. Later Williams J., in Minister of State for the Army v. Dalziel [29] , stated that the House of Lords, in Matthey v. Curling [30] , had decided that the doctrine did not apply to leases. But, as we have seen, the House of Lords has now held in Panalpina [31] that it does. For the sake of completeness I should mention that Buchanan was followed in Hughes v. N.L.S. Pty. Ltd. [32] (affd. on different grounds [33] ) and that the New South Wales Court of Appeal has favoured the view that the doctrine of repudiation applies to a lease: Leitz Leeholme Stud Pty. Ltd. v. Robinson [34] .

1. (1926) 38 C.L.R. 261, at p. 268. 2. (1926) 38 C.L.R., at p. 269. 3. (1944) 68 C.L.R. 261, at p. 302. 4. [1922] 2 A.C. 180. 5. [1981] A.C. 675. 6. [1966] W.A.R. 100. 7. (1966) 120 C.L.R. 583. 8. [1977] 2 N.S.W.L.R. 544.

The decisions in Australia and Canada, and the speeches in Panalpina, reflect the point made by William O. Douglas and Jerome Frank in Landlords' Claims in Reorganizations, Yale Law Journal, vol. 42 (1933), p. 1003, in footnote 6, that, as the law of landlord and tenant had outgrown its origins in feudal tenure, it was more appropriate in the light of the essential elements of the bargain, the modern money economy and the modern development of contract law that leases should be regulated by the principles of the law of contract.

Accordingly, the balance of authority here as well as overseas, and the reasons on which it is based, support the proposition that the ordinary principles of contract law, including that of termination for repudiation or fundamental breach, apply to leases. However, it has been suggested that the presence of an express proviso for reentry in a lease excludes any other right of termination of the lease by the lessor. Thus, in Rosa Investments Pty. Ltd. v. Spencer Shier Pty. Ltd. [35] , it was held that at common law re-entry is necessary to forfeit a lease unless dispensed with by contract. The better view is, in my opinion, that re-entry is essential only where the parties stipulate that advantage shall not be taken of a forfeiture except by an entry upon the land: Liddy v. Kennedy [36] . If it be accepted that the principles of contract law apply to leases, it is not easy to see why the mere presence of an express power to terminate should be regarded as excluding the exercise of such common law rights as may otherwise be appropriate. It is, of course, open to the parties by their contract to regulate the exercise of the common law right to determine for repudiation or fundamental breach. But in this case the parties have not attempted to do so.

1. [1965] V.R. 97. 2. (1871) L.R. 5 H.L. 134, at p. 151.

The respondent seems to have asserted at first instance and in the Court of Appeal that the lease was brought to an end by commencement of the action, this step amounting to a re-entry under cl. 10.1. There is no suggestion in the judgments that the respondent asserted at any time that it was determining the lease otherwise than under this provision. Although it is now conceded by the appellant that the lease was terminated under cl. 10.1, the issue of repudiation arises because, as will appear later, the respondent cannot recover damages for loss of the benefit of the lease unless it establishes repudiation or fundamental breach by the appellant.

Shevill [37] decided (a) that the proviso for re-entry in that case, cl. 9(a), did not make breach of the covenant to pay rent breach of an essential term of the contract; and (b) that the evidence did not justify a finding that there was a fundamental breach of contract which would have entitled the lessor to rescind under the general law and sue for damages. The Court was not called upon to decide whether a lessor can sue to recover damages for loss of bargain when he re-enters under a proviso for re-entry in consequence of the lessee's repudiation or fundamental breach. Gibbs C.J. [38] , with whom Murphy and Brennan JJ. agreed, in passing observed, "It may be that cl. 9(a) excludes the rights that would ordinarily flow from an accepted repudiation of the contract." This observation looks back to the construction of the clause which his Honour had already examined in some detail. It should not be taken as an indication that a proviso for re-entry necessarily excludes damages for loss of bargain whenever the lessor forfeits the lease pursuant to the proviso. And the Chief Justice's earlier comment [39] on the need for very clear words to bring about the result that whenever a lessor could exercise the right to re-enter he could recover damages for loss of bargain is not directed to damages for repudiation by the lessee; it is aimed at the suggestion that the proviso should be so construed as to provide for such damages when re-entry takes place on the occurrence of a breach which is non-fundamental or minor.

1. (1982) 149 C.L.R. 620. 2. (1982) 149 C.L.R., at p. 629. 3. (1982) 149 C.L.R., at p. 628.

It is often said that repudiation or fundamental breach - in the sense of breach of a condition or breach of another term or terms which is so serious that it goes to the root of the contract, and thus deprives the other party of substantially the whole benefit of the contract (Federal Commerce & Navigation Co. Ltd. v. Molena Alpha [40] ) - entitles the innocent party to rescind the contract and sue for damages for loss of the bargain: see, e.g., Ogle v. Comboyuro Investments Pty. Ltd. [41] . But this does not mean that such damages are recoverable only in the event of discharge for breach though it is essential to an award of damages for loss of bargain that the defendant can no longer be required to perform his contractual obligations in specie. This essential foundation may be established by a common law rescission of the contract by the innocent party or by a termination of the contract in the exercise of a contractual power so to do. In either event, assuming repudiation or fundamental breach by the defendant, he could no longer be required to perform the contract and is liable for damages for loss of bargain. The well-recognized distinction between common law rescission and termination pursuant to a contractual power supplies no reason in principle why such damages are recoverable by the innocent party in one case and not in the other, provided of course that the exercise of the power is consequent upon a breach or default by the defendant which would attract an award for such damages.

1. [1979] A.C. 757, at p. 779. 2. (1976) 136 C.L.R. 444, at p. 458.

Termination in the exercise of a contractual power is not an affirmation of the contract which debars the innocent party from suing for damages for breach on the ground of repudiation or fundamental breach. This is because the termination, so far from insisting on performance by the party at fault, brings to an end his obligation to perform his promise in specie.

Nor can it be said in the case of repudiation or fundamental breach, that loss of the bargain is attributable to the innocent party's exercise of his contractual power to terminate. It is different in the case of termination for non-essential breach, as Shevill demonstrates, because, by terminating pursuant to the contract at that stage, the innocent party puts it beyond his power to insist on performance, thereby bringing to an end any possibility of repudiation or fundamental breach with consequential damages for loss of bargain.

If the lessor has a common law right to recover damages for loss of bargain consequent upon repudiation or fundamental breach, in the event that the lease is determined, either by acceptance of that repudiation or fundamental breach or by forfeiture as a result of re-entry, there is a difficulty in asserting that the lessor's right to recover after re-entry is subject to an acknowledgment of that right by the terms of the lease. It would be consistent with the principle to say that the right continues unless it is excluded by the lease.

The appellant's first submission in this Court is that on the exercise by the respondent of its right of re-entry for breach of covenant, its right to recover damages was limited to damages for breaches which had already occurred and that they did not extend to damages for loss of the benefit of the covenant to pay future rent and outgoings, that is, rent and outgoings accruing due after the re-entry. The appellant contends that this result follows from the terms of cl. 10.1 which confer the right of re-entry for breach of covenant. On its true construction, so the argument runs, the clause restricts the lessor's right to sue for damages to those breaches which have taken place before re-entry. The weakness in this argument is that the clause does not exclude liability for non-performance of obligation accruing after the date of re-entry. The clause explicitly preserves "any claim which the Lessor may have against the Lessee in respect of any breach of the covenants and provisions to be observed or performed ". A claim based on a repudiation or a fundamental breach occurring before re-entry, necessarily answers this description. The comments of Gibbs C.J. in Shevill [42] give no support to the appellant's submission because his Honour was rejecting an argument that cl. 9(a) in the lease in that case conferred on the lessor who re-entered the same rights as would have been available to him if he had accepted a repudiation of the contract or had rescinded it on the ground that the lessee had committed a breach of an essential term.

The appellant's next submission is that the evidence does not justify the conclusion that the appellant had demonstrated that it would or could no longer perform its obligations under the memorandum of lease or that there had occurred a fundamental breach entitling the respondent to rescind and recover damages for loss of bargain. In support of this submission the appellant points out, correctly, that repudiation of a contract is a serious matter and is not to be lightly inferred and that neither a breach of a covenant to pay rent nor a breach of a covenant to repair, without more, constitutes a breach of a fundamental term, nor amounts to a repudiation of a lease.

Our consideration of the issue of repudiation and fundamental breach is complicated by the circumstances that the primary judge made no finding on the issue of repudiation because he thought, in the light of the Court of Appeal decision in Shevill, that it was unnecessary to do so and because Hutley J.A., with whom Reynolds J.A. agreed, instead of examining the evidence relevant to the issue of repudiation, merely concluded that the appellant's conduct was repudiatory on the ground that it would have justified forfeiture "under circumstances in which the Court would refuse relief". The primary judge's reasons for refusing relief against forfeiture were expressed in the following passage:

The breach of the covenant to pay rent was in respect of a substantial amount and has been continued and persisted in over a long period. The matter of the roof and electrical fittings, apart from the breaches involving an unnecessary misuse of the premises and their continuance has shown a disregard for the premises and the plaintiff's interest in them. The defendant's attitude is further illustrated by its disregard of the requirements concerning the important restrictions on the use of the drive and parking areas and its conduct in relation to the fire doors and staircases. It is further shown by the sub-letting of the premises. I find that on all the circumstances it would be inequitable that relief should be granted.

This finding, though it comes close to a finding of repudiation, stops short of it. What needs to be established in order to constitute a repudiation is that the party evinces an intention no longer to be bound by the contract or that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way: Shevill [43] . Likewise, that primary judge's finding does not amount to a finding that there was a fundamental breach of contract in the sense that the party at fault, though wishing to perform the contract, was guilty of such default in performance that the breach went so much to the root of the contract that it made commercial performance of it impossible. Whether fundamental breach is but another illustration of repudiation, as Mahoney J.A. thought in Honner v. Ashton [44] , or is a separate category, is a question which may be put to one side.

1. (1982) 149 C.L.R., at pp. 625-627. 2. (1979) 1 B.P.R. 9478, at p. 9490.

Repudiation or fundamental breach of a lease involves considerations which are not present in the case of an ordinary contract. First, the lease vests an estate or interest in land in the lessee and a complex relationship between the parties centres upon that interest in property. Secondly, this relationship has been shaped historically in very large measure by the law of property, though in recent times the relationship has been refined and developed by means of contractual arrangements. Thus, traditionally at common law a breach of a covenant by a lessee, even breach of the covenant to pay rent, conferred no right on the lessor to re-enter unless the lease reserved a right of re-entry: Lane v. Dixon [45] ; Doe d. Dixon v. Roe [46] . And in equity the proviso for re-entry was treated as a security for the payment of the rent (Howard v. Fanshawe [47] ; Ezekiel v. Orakpo [48] ), so that on payment of the rent equity would relieve against the forfeiture: Dendy v. Evans [49] . The object and effect of s. 129 of the Conveyancing Act was to give further protection to the lessee and to preclude forfeiture of his interest in property within the sphere of the section's operation, except in accordance with its terms.

1. (1847) 3 C.B. 776 [136 E.R. 311]. 2. (1849) 7 C.B. 134 [137 E.R. 55]. 3. [1895] 2 Ch. 581, at p. 588. 4. [1977] Q.B. 260, at pp. 268-269. 5. [1910] 1 K.B. 263.

These incidents of the law of landlord and tenant indicate that mere breaches of covenant on the part of the lessee do not amount to a repudiation or fundamental breach. Indeed, it is of some significance that the instances in which courts have held that a lessee has repudiated his lease are cases in which the lessee has abandoned possession of the leased property. But too much should not be made of this as very few cases of repudiation by lessees have come before the courts. I would therefore specifically reject the appellant's submission that abandonment of possession is necessary to constitute a case of repudiation by a lessee. On the other hand, it should be acknowledged that it would be rare indeed that facts which fell short of abandonment would properly be seen as constituting repudiation by the lessee in the case of a long lease at a rental which was either nominal or but a fraction of the amount which could be obtained in the market place.

It is evident that the appellant was responsible for physical damage to the premises which it failed to rectify in accordance with the requirements of the respondent's notice dated 16 August 1979 under s. 129 of the Conveyancing Act. The primary judge found that the appellant caused damage to the roof structure by stacking pallets on or against the roof trusses causing damage to them, producing cracks in the roof which resulted in leaks. His Honour found that in failing to rectify these defects the respondent committed breaches of cll. 5.1, 5.2 and 5.3 of the lease. However, it seems that the nature of the construction was such as to make the roof susceptible to damage and his Honour thought that the leaks were, in some respects at least, minor. There is no suggestion that the damage to the roof trusses was deliberate.

By May 1979 damage was done by the appellant to the electrical system on the premises. This included smashed light fittings, illegal joints in cables, exposed wiring, smashed power outlets and damaged wiring. In that month the respondent rectified earlier breaches, but it then caused further damage so that in August 1979 the condition of the electrical system was much as it had been before the repairs undertaken in May. The damage was such as to create a possibility of electrical shock to individuals and of fire. The damage was not deliberate and seems to have been due to carelessness.

Damage was also done to downpipes leading to leaks, but it seems that no effort was made to repair down pipes until June 1981. However, the primary judge made no finding on this matter or in relation to windows which, it is admitted, were broken.

The lease permitted sub-letting with the previous written consent by the lessor and upon certain conditions as to the character of the tenant. The appellant sublet part of the premises, being approximately one-tenth of the area, without having sought consent to do so.

The appellant was also in breach of cl. 5.8 of the lease. This clause required the lessee to comply with all laws governing the use of the premises. Clause 77 of the Willoughby Planning Scheme Ordinance provided that any person who contravened or failed to comply with the terms and conditions of any consent given under the Ordinance should be deemed to have committed an offence. The schedule to the Development Consent which regulated the lessee's use of the premises required that (a) the proposed vehicular drive-through area be permanently marked out and be kept solely free for that purpose; and (b) all parking and loading areas be kept free from obstruction at all times and be used for off-street parking and loading purposes respectively. The appellant caused the vehicular drive-through area to be obstructed by steel shelving used for storage of commodities and caused the parking and loading area to be blocked and obstructed by crates and rubbish. The appellant's excuse for this breach was merely that there was no other usable space available.

Other alleged breaches of covenant have been debated by the parties. With the exception of the breach of the covenant to pay rent, I do not find it necessary to discuss them because they seem to be insignificant or because they throw insufficient light on the issue of repudiation or fundamental breach.

It is not suggested that the breaches so far discussed, viewed in isolation, amounted to a repudiation or fundamental breach of the lease. It is the breach of the covenant to pay rent, in association with the other breaches, which is the central feature of the respondent's case on this issue. As we have seen, rent was not paid for the first two months of the lease and from May 1979 to 19 October 1979, notwithstanding the assertion by the respondent's solicitors in a letter dated 9 August to the appellant's solicitors that the appellant was bound to pay the rent. On 19 October 1979 after the issue of the statement of claim the appellant's solicitors paid $20,750 representing "an occupation fee" in respect of the months June to October 1979 less a sum of $18,000 retained to cover a claim which the appellant made for certain work, a claim which seems to have had no basis in law or fact. The sum of $18,000 has never been paid by way of rent or occupation fee.

The appellant's refusal to pay rent was associated with its claim that the certificate required by cll. 11.6 and 11.7 had not been properly given. The certificate was not given by an architect as those provisions contemplated and the appellant claimed that the respondent had not carried out the works specified in the second schedule. The appellant consistently maintained an attitude that the completion of those works was a condition precedent to its liability to pay rent.

The object of cl. 11.6 was to fix a date on which the appellant became bound to take possession of the premises. Clause 11.7 then provided that rent should be payable at the expiration of two months from the expiration of the fourteen day period specified in the notice for which cl. 11.6 provided. The appellant was permitted to occupy the premises in October 1978 and then began to use the premises for the warehousing, packaging and distribution of goods. The primary judge's finding that the lease commenced on 4 December 1978 has not been challenged, though the appellant does challenge the conclusion that rent became payable at that date. Although the evidence does not disclose the circumstances under which the appellant entered into occupation, it is not in question that the appellant was in possession under the lease. Indeed, as the appellant claimed to have been in possession under the unregistered lease, it was liable to pay the rent fixed by the lease, the only question being whether the liability to pay rent arose on 4 December, as the primary judge thought, or two months later on the footing that the date of entry into occupation was to be equated to the date of expiration of a notice provided for by cl. 11.6. It is unnecessary to resolve this question because on any view the appellant was in breach of the covenant to pay rent and the respondent has not pressed for the payment of the first two months' rent at any stage of these proceedings. The two months "rent-free holiday" contemplated by cl. 11.7 was apparently taken into account by the primary judge when he fixed 4 December rather than October 1978 as the date of commencement of the lease. His Honour seems to have thought that the appellant was allowed this period in which to settle into the premises and establish its business there. He evidently came to the conclusion that the appellant had established its business there by 4 December.

The appellant's excuse for not paying the rent was that the work specified in the second schedule had not been carried out satisfactorily. Even assuming that this claim was well founded it did not entitle the appellant to refuse to pay the rent. The appellant persisted in maintaining a claim which was without any foundation, namely that it was under no liability to pay the rent until the work in question was carried out satisfactorily. This was a refusal to carry out its obligations according to the terms of the unregistered lease and a persistence in carrying them out in a way substantially inconsistent with these terms.

It is not to the point that the appellant acted in accordance with counsel's advice. This is not a case like D.T.R. Nominees Pty. Ltd. v. Mona Homes Pty. Ltd. [50] , in which there was a bona fide dispute as to the true construction of a contract expressed in unclear terms. Here there was simply no basis in the provisions of the lease to support the appellant's refusal to pay rent. The rent did not represent but a nominal amount or but part of the valuable consideration which the appellant had agreed to provide in return for the right of use and occupancy which it argued under the memorandum of lease. It represented the whole of what the respondent was entitled to receive in the ordinary course in respect of the demised land during the term of the lease in a context where it would continue to be liable for some of the outgoings in respect of the premises.

In the result the evidence supports the conclusion that the appellant's conduct amounted to a repudiation of the lease or a fundamental breach of its obligations under the lease. The fact that the appellant lodged a caveat on 11 July 1979 to protect its interest as lessee under the unregistered lease is not at all inconsistent with this conclusion. Though maintaining a claim to the benefit of a contract, a party may repudiate it or commit a fundamental breach of it by refusing to perform his obligations according to its terms.

I have had the advantage of reading the reasons for judgment prepared by Mason J. I agree substantially with those reasons and with the conclusion to which they lead. I wish merely to add some brief observations on one aspect of the matter.

The nub of the case for the appellant is that its conduct in withholding the payment of rent from May 1979 until October 1979 should not be taken as a repudiation or fundamental breach of its obligations under the contract as it believed bona fide that until such time as the respondent carried out in a satisfactory manner the works specified in the second schedule there was no obligation to pay any rent. In support of that case it is submitted that the completion of those works was a condition precedent to such an obligation arising. But the submission cannot be accepted. Clause 11.6 obliges the respondent to carry out the work specified in the schedule. It also makes the opinion of the lessor's architect that the work has been completed a condition precedent to the appellant coming under an obligation to enter into occupation of the premises. If entry is effected pursuant to that clause then cl. 11.7 secures to the appellant a rent-free holiday for two months. However, the critical fact is that the appellant did not take possession of the premises pursuant to cl. 11.6. It was already in possession before that time was reached. That being so, there was no obstacle to the operation of the covenant undertaken by the appellant in cl. 3 to pay rent. Had the appellant chosen not to enter into possession prior to the completion of the works, it would have been on firm ground in insisting on meticulous compliance by the respondent with the requirements of cl. 11.6 before it came under any obligation to do so. On the other hand, once it was in possession under the agreement, it was obliged to observe the covenant contained in cl. 3 to pay the rent. It then have to seek the enforcement of the respondent's obligations by other means. It was not entitled to take the law into its own hands by withholding the rent. As it happened, of course, the learned trial judge rejected the appellant's allegations against the respondent.

The appellant's action in withholding the rent was persisted in over a period of several months and continued even after its receipt of the letter of 9 August 1979 from the respondent's solicitors which bluntly warned it of the consequences of continuing in the course it had adopted. This history of the matter, coupled with the circumstances relating to other breaches of covenant as found by the trial judge, leads irresistibly to the conclusion that the appellant was in fundamental breach of its obligations under the contract and is therefore liable in damages.

The respondent was the lessor and the appellant was the lessee in possession of land at Artarmon under an unregistered though registrable memorandum of lease for a term of five years. In an action brought by the lessor in the Supreme Court of New South Wales, Lusher J. found that the lessee had committed breaches of certain covenants including the covenant for the payment of rent. The memorandum of lease contained a proviso for re-entry in the events, inter alia, of non-payment of rent for fourteen days after the due date or of failure to observe or perform a lessee's covenant after service of a thirty-day notice to do so. It was not disputed that, given the occurrence of breaches of covenant, service of the statement of claim (which sought leave to issue a writ of possession) "amounted to a forfeiture of the lease". Relief against forfeiture was refused. His Honour gave leave to issue a writ of possession and ordered an inquiry before a Master to ascertain the amounts due to the lessor under the lease and as mesne profits. In addition, Lusher J. awarded the lessor $85,000 damages for breach of contract. The lessor had claimed damages "in respect of the cost of reletting and delay in reletting premises that would follow the plaintiff obtaining possession". Lusher J. held that, although rent cannot be recovered after forfeiture, "a lessor may recover damages for breach of a covenant to pay rent into the future, in other words, for the loss of the benefit of the covenant". His Honour assessed damages accordingly. The Court of Appeal dismissed an appeal against the judgment. The sole question of this appeal is whether the lessor was entitled to damages for the loss of the benefit of the covenant or, more precisely, for the loss of the benefit of the lease.

When a lease is determined prior to the expiry of the term, the covenant to pay rent for the unexpired portion of the term ceases to bind the lessee. Once the lease is determined, the lessee commits no breach of covenant by reason of his non-payment of rent for that unexpired portion: Jones v. Carter [51] . A lessor who, under a proviso for re-entry, serves the lessee with process for recovery of possession is entitled to mesne profits for the period during which the lessee remains in possession after service: Canas Property Co. Ltd. v. K.L. Television Services Ltd. [52] . The lessor may thereby recover an amount equal to the rent in respect of that period. But mesne profits are damages for trespass; mesne profits are not rent, nor are they damages for breach of a covenant to pay rent.

1. (1846) 15 M. & W. 718, at p. 726 [153 E.R. 1040, at p. 1043]. 2. [1970] 2 Q.B. 433.

A lessor can recover damages for loss of the benefit of a lease only where the lessee has repudiated the lease before determination of the term. Such a repudiation is not necessarily established by proving a default in the payment of rent. In Shevill v. Builders' Licensing Board [53] , Gibbs C.J. said with the concurrence of Murphy J. and me:

It is clear that a covenant to pay rent in advance at specified times would not, without more, be a fundamental or essential term having the effect that any failure, however slight, to make payment at the specified times would entitle the lessor to terminate the lease. The Chief Justice stated the general principles governing the rescission of contract for anticipatory breach [54] . Repudiation by anticipatory breach occurs - if one party renounces his liability under it - if he evinces an intention no longer to be bound by the contract (Freeth v. Burr [55] ) or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way (Ross T. Smyth & Co. Ltd. v. T. D. Bailey, Son & Co. [56] ; Carr v. J. A. Berriman Pty. Ltd. [57] ). In such a case the innocent party is entitled to accept the repudiation, thereby discharging himself from further performance, and sue for damages: Heyman v. Darwins Ltd. [58] . It is convenient to say that the injured party in these circumstances rescinds the contract, although there is, of course, no rescission ab initio: Johnson v. Agnew [59] . 1. (1982) 149 C.L.R., at p. 627. 2. (1982) 149 C.L.R., at pp. 625-626. 3. (1874) L.R. 9 C.P. 208, at p. 213. 4. [1940] 3 All E.R. 60, at p. 72. 5. (1953) 89 C.L.R. 327, at p. 351. 6. [1942] A.C. 356, at p. 399. 7. [1980] A.C. 367, at pp. 392-393.

In the present case, the lessee's breaches of covenant are said to show an intention to act, and to act only, in a manner substantially inconsistent with his obligations under the lease. For the reasons stated by Mason J., I think that the lessee did show such an intention and that the lessee repudiated the contract embodied in the lease. That conclusion makes it necessary to decide in this case what was assumed but not decided in Shevill v. Builders' Licensing Board, namely, whether the general contractual principles relating to rescission for anticipatory breach and damages for the loss of benefit of a contract apply when a lessee, by words or conduct, repudiates his obligations under the lease. It is the character of a lease as a demise which may be thought to exclude the operation of those principles. For reasons that I shall state presently I would hold that ordinary contractual principles do apply to a lease, but that the character of a lease as a demise distinguishes the consequences of their application from their application to a contract that is not also a demise. If ordinary contractual principles apply to a lease, a fortiori they apply to an agreement to grant a lease or to an unregistered memorandum of lease which is not effective to convey a legal leasehold interest: cf. Leitz Leeholme Stud Pty. Ltd. v. Robinson [60] . It is therefore appropriate to consider the question on the footing that the memorandum of lease was effective to convey such an interest. The parties agreed that Lusher J. should decide the matter on the footing that the memorandum had been registered and that agreement requires the question to be considered on the footing that a legal interest was conveyed to the lessee.

In Total Oil Great Britain Ltd. v. Thompson Garages (Biggin Hill) Ltd. [61] , Lord Denning M.R. thought that a lease, being a demise as well as a contract, does not come to an end on repudiation and acceptance. His Lordship thought that views expressed by Lord Russell of Killowen and Lord Goddard in Cricklewood Property and Investment Trust Ltd. v. Leighton's Investment Trust Ltd. [62] that frustration does not bring a lease to an end supported the view that repudiation and acceptance does not do so. Holding that the lease continued, his Lordship rejected an argument that a breach by the lessor gave the lessee an option to be relieved of its contractual obligations. Subsequently in National Carriers v. Panalpina Ltd. [63] the House of Lords held that the doctrine of frustration can, in principle, apply to leases. Lord Wilberforce [64] said that "there is nothing illogical in implying a term that [the lease] should be determined on the happening of events which in an ordinary contract work a frustration". The speech of Lord Simon of Glaisdale [65] contains a passage to the same effect. The question whether the doctrine of frustration is excluded when the contractual obligation relied on is created by an instrument of lease was considered by this Court in Firth v. Halloran [66] . Opinions were divided. I do not stay to consider that question, for we are not now concerned with a suggested determination of a lease by frustration. Discharge of contract by frustration and discharge by repudiation and acceptance are distinct modes of termination of contract to which different consequences attach. There is no valid analogy between the implication of a term that determines a lessee's interest on the happening of a frustrating event and the implication of a term empowering a lessor to elect to determine a lease before the expiry of the term granted in the event of repudiation by the lessee, especially if the term is to be implied in a lease which contains an express power to determine the lease in the event of a breach of covenant. An implied term that a lease should determine on the happening of a frustrating event is in the nature of a limitation. An implied term that a lessor should have an election to determine if the lessee should repudiate is in the nature of a condition. Where, as in the present case, a lease contains a proviso for re-entry in certain events including the commission of specified breaches of covenant, it is not possible to imply a term which entitles the lessor to determine the lease in the event of anticipatory breaches of covenant that do not constitute a specified breach of covenant. The lessee's interest in the land, once vested in him by the demise, may be divested by breach of a condition of defeasance (as described in Bashir v. Commissioner of Lands [67] ) or by exercise of a power of re-entry for breach of covenant expressly reserved by the lease. A lessee's contravention of the provisions of a lease does not otherwise empower a lessor to determine the lease: Doe d. Dixon v. Roe [68] . Thus Woodfall's Law of Landlord and Tenant, 28th ed. (1978), p. 836 says:

A lease may be determined by entry or ejectment for a forfeiture incurred either by (1) breach of a condition in the lease; or (2) for a breach of any covenant, in case (and in case only) the lease contain a condition or proviso for re-entry for a breach of such covenant. A footnote reads: It is of importance that a lease for years should contain a proviso for re-entry for non-payment of rent at any rate, as otherwise the lessor may find himself saddled with an impecunious tenant, and not be able to get rid of him. In Hallen v. Spaeth [69] , the lessee sub-demised for the whole of the term contrary to the stipulation in his lease, but Viscount Haldane, delivering the judgment of the Judicial Committee, said that "the lease conferred on the lessor no right to put an end to the term for such a breach, and his remedy was merely in damages for breach of agreement" [70] . It may be noted in passing that the issue in that case turned on a provision in the sub-demise which did not touch or concern the interest which passed to the sub-lessee, and it was in reference to that circumstance that his Lordship said that "it is the contract between the sub-lessor and his sub-lessees, and not the estate which passed, which is the determining factor" [71] . Isaacs J. referred to those words in Firth v. Halloran [72] , but neither that reference nor the speeches in Hallen v. Spaeth support the proposition that a lessor may determine a lease by mere acceptance of a lessee's repudiation of his obligations under the covenants of a lease where the lessee's interest in the land is not liable to forfeiture. It would be a curious law which permitted a lessee in breach of covenant to seek relief against forfeiture while denying the prospect of relief to a lessee who had committed an anticipatory breach. 1. [1972] 1 Q.B. 318, at p. 324. 2. [1945] A.C. 221. 3. [1981] A.C. 675. 4. [1981] A.C., at p. 694. 5. [1981] A.C., at p. 705. 6. (1926) 38 C.L.R. 261. 7. [1960] A.C. 44. 8. (1849) 7 C.B. 134 [137 E.R. 55]. 9. [1923] A.C. 684. 10. [1923] A.C., at p. 687. 11. [1923] A.C., at p. 690. 12. (1926) 38 C.L.R., at p. 269.

A lessor's inability to determine a lessee's interest except where it is liable to forfeiture precludes the lessor from rescinding the lease for anticipatory breach, but it does not follow that the ordinary contractual principles relating to anticipatory breach do not apply to a lease where the lessee's interest is liable to forfeiture.

An objection taken in some jurisdictions to the application of those principles to leases is that a lease is a contract that has been executed or substantially executed by the lessor and that the principles relating to anticipatory breach apply only where the innocent party puts an end to executory obligations resting on him. It is true that, under an ordinary lease, the lessor's granting of the term discharges by performance his chief obligation, and the executory obligations under the lease rest chiefly on the lessee. If the lessor be under no executory obligations (or if his executory obligations be insubstantial), rescission for anticipatory breach by the lessee makes no difference (or no substantial difference) to the position of the lessor: he has parted with the leasehold interest and that interest is not liable to be revoked by mere rescission. In the leading case of Hochster v. De la Tour [73] , Lord Campbell C.J. advanced as a reason for the rule relating to anticipatory breach the desirability of absolving the promisee from performance of his executory obligations [74] :

it is surely much more rational, and more for the benefit of both parties, that, after the renunciation of the agreement by the defendant, the plaintiff should be at liberty to consider himself absolved from any future performance of it, retaining his right to sue for any damage he has suffered from the breach of it. 1. (1853) 2 E. & B. 678 [118 E.R. 922]. 2. (1853) 2 E. & B., at p. 690 [118 E.R., at p. 926].

In Mersey Steel and Iron Co. v. Naylor, Benzon & Co. [75] , Lord Blackburn said:

The rule of law, as I always understood it, is that where there is a contract in which there are two parties, each side having to do something (it is so laid down in the notes toPordage v. Cole [76] ), if you see that the failure to perform one part of it goes to the root of the contract, goes to the foundation of the whole, it is a good defence to say, "I am not going on to perform my part of it when that which is the root of the whole and the substantial consideration for my performance is defeated by your misconduct." (Emphasis added.) 1. (1884) 9 App.Cas. 434, at pp. 443-444. 2. (1669) 1 Wm. Saund. 319 [ 85 E.R. 449].

In Mackenzie v. Rees [77] , Dixon J. noted that there was then no English decision which applied the doctrine of anticipatory breach to contracts completely executed on one side and that that was the view of Anson in his first edition of the Law of Contracts (1879). His Honour quoted from the American Restatement of the Law of Contracts, Art. 318e, p. 477: "There must be some dependency of performances in order to make anticipatory breach possible." That view commands substantial though not uniform support in the United States. Cooke J. reviewed the authorities in Long Island Rail Road Co. v. Northville Industries Corp. [78] , where he said:

The doctrine of anticipatory breach has not generally been applied to all types of contracts, its application being limited ordinarily to bilateral contracts embodying some mutual and interdependent conditions and obligations. Moreover, limitations on the doctrine exist even in the instance of "a contract originally bilateral that has become unilateral and similarly unconditional by full performance by one party" For the doctrine to apply there must be "some dependency of performances" (Restatement, Contracts, s318, Comment e). For this reason, a party who has fully performed cannot invoke the doctrine even though the other party has repudiated. 1. (1941) 65 C.L.R. 1, at pp. 15-16. 2. (1977) 362 N.E. (2d) 558, at p. 563.

The circumstance that obligations which have been performed are not affected by rescission for anticipatory breach does not necessarily mean that damages for anticipatory breach are denied to a party who has performed his obligations. The principles relating to anticipatory breach put both a shield and a sword in the hands of an innocent party who accepts the other party's repudiation. His shield is the ending of his executory obligations; his sword is an immediate right to damages. Where the contract has been fully performed by one party, no question of repudiation by him arises and he is under no executory obligation from which he might wish to be discharged in the event of repudiation by the other party. He has no need of a shield. But he may wish to brandish a sword. Although the paradigm case in which the principles are applied involves interdependent executory obligations, anomalies would occur if there were an unqualified rule that damages for repudiation by anticipatory breach should be refused where the innocent party has fully performed his obligations, but granted where he has not. Whether the contract be executed or executory, it can be said that repudiation causes the innocent party loss of the benefit of the contract. Indeed, where the innocent party has fully performed his obligations, a repudiation by the other party deprives him not only of the profit to which his bargain entitled him but also of compensation for the cost incurred in performing his obligations.

On the other hand, it can be said that a party who has performed his obligations under a contract is entitled to no more and no less than the full and timeous performance of the obligations resting on the other party, and that an immediate award of damages for anticipatory breach of those obligations gives him more than the benefit of his bargain. There is substance in the observation by Williston on Contracts, 3rd ed. (1968), vol. 11, s1313 that -

The law can properly excuse a promisor from performing whenever justice requires, but it does not have the same liberty of enlarging a promisor's contractual obligations. Cardozo J. speaking for the Supreme Court of the United States in New York Life Insurance Co. v. Viglas [79] , held that a mere creditor, whose debtor repudiated his obligation to pay future instalments of money due, could not advance the time for payment by accepting the repudiation, saying [80] - a party to a contract who has no longer any obligation of performance on his side but is in the position of an annuitant or a creditor exacting payment from a debtor, may be compelled to wait for the instalments as they severally mature, just as a landlord may not accelerate the rent for the residue of the term because the rent is in default for a month or for a year. And in Mackenzie v. Rees [81] , Dixon J. cited Canadian authority for the proposition that the time for payment of a debt due on a particular day cannot be accelerated though the debtor declare his intention to dispute his liability. 1. (1936) 297 U.S. 672 [80 Law. Ed. 971]. 2. (1936) 297 U.S., at p. 680 [80 Law. Ed., at p. 976]. 3. (1941) 65 C.L.R., at p. 16.

Where an innocent party has done no more than perform all his obligations under a contract in accordance with its terms, there is something to be said for a rule that gives him no more than he bargained for, that is to say, damages against the repudiating party for failure to discharge that party's obligations as and when they fall due. A strong case can be made for such a rule when the innocent party's performance of the contract results in the conferring of an irrevocable benefit on the other party and the only executory obligation of the repudiating party is to pay money at a future time: see Williston on Contracts, 3rd ed. (1968), vol. 11, s1326. Why should repudiation entitle the innocent party to accelerated payment when the contract stipulates that, in the circumstances that have occurred, that party should receive payment at a later time? But compare the views of Corbin, Contracts (1951), vol. 4, s963.

However, there is no warrant for such a rule when the innocent party can and does revoke the benefit which the innocent party's performance of his obligations conferred on the repudiating party. Revocation of the benefit places the parties in a position similar to the position they would have been in if the contract had remained executory. Unless the innocent party has a right to damages in these circumstances, he cannot recover the benefit of his bargain. If he revokes the benefit that was conferred on the repudiating party, he cannot insist on the performance by that party of the interdependent obligations that fall due thereafter. Unless he is entitled to damages, he can obtain the benefit of the bargain only by foregoing the right to revoke the benefit, trusting that the other party will repent and perform the obligations he repudiated. The principles relating to anticipatory breach are intended to avoid the necessity for useless performance and to mitigate the damages for which the repudiating party is liable by permitting the innocent party to dispose of any property, services or other benefits to which the repudiating party would have been entitled under the contract. It accords with principle to permit a lessor to recover damages for anticipatory breach by a lessee when the benefit which has passed to the lessee - the interest in the land demised - is revoked by enforcing a forfeiture or by some other means of determining the lease. It accords too with authority.

Buchanan v. Byrnes [82] was a case where the lessor of licensed premises claimed damages against a lessee who had abandoned the premises. The lease was surrendered. Barton J. held that the lessor was entitled to damages on accepting the lessee's repudiation. He said [83] :

It must not be forgotten that a right of action had arisen on the termination of the correspondence on the 28th June, as the defendant had given distinct notice of his intention not to perform his covenant. There was at that time a renunciation which, at the plaintiff's option, amounted to a breach of the covenants that throughout the term he would carry on a licensed victualler's business upon the premises and keep them open and in use as an inn, &c., and of the covenant not to do anything which might entail forfeiture of the licence as well as of the subsidiary covenants. The plaintiff was then entitled to claim in an immediate action, prospectively, such damages as would be caused by a breach at the appointed time, subject to any circumstances which might operate in mitigation of damages: Leake on Contracts, 4th ed., 617-618, and cases there cited, especially Hochster v. De la Tour [84] , and Johnstone v. Milling [85] Griffith C.J. [86] and O'Connor J. [1] also held that the lessor was entitled to damages. Subsequently, in Lamson Store Service Co. Ltd. v. Russell Wilkins & Sons Ltd. [2] , Griffith C.J. stated the measure of the damages: In the ordinary case of a demise for a term of years with an express covenant to pay the rent, if the lessee unequivocally repudiates the lease and abandons the land, the lessor may at his option bring an immediate action for breach of covenant, in which he will be entitled to recover the full amount of the agreed rent for the whole term, less such sum as a jury may think he is likely to derive as profits from the use of the land during the residue of the term: Buchanan v. Byrnes [3] This is the ordinary rule of damages. Thus in Hughes v. N.L.S. Pty. Ltd. [4] a repudiation of a lease by the lessee was followed by a surrender and Jackson J. [5] , applying Buchanan v. Byrnes, held that "Until surrender, [the lessor] can sue for rent as such; after surrender, he is limited to damages for loss of rent flowing from the lessee's breach of contract." 1. (1906) 3 C.L.R. 704. 2. (1906) 3 C.L.R., at p. 719. 3. (1853) 2 E. & B. 678 [118 E.R. 922]. 4. (1886) 16 Q.B.D. 460. 5. (1906) 3 C.L.R., at p. 714. 6. (1906) 3 C.L.R., at p. 721. 7. (1906) 4 C.L.R. 672, at p. 684. 8. (1906) 3 C.L.R. 704. 9. [1956] W.A.R. 100 (affd. on different grounds (1966) 120 C.L.R. 583). 10. [1966] W.A.R., at p. 102.

Buchanan v. Byrnes was followed by the Supreme Court of Canada in Highway Properties Ltd. v. Kelly, Douglas & Co. Ltd. [6] . Laskin J. (as he then was) delivering the judgment of the Supreme Court, thought that this Court's approach had cut through artificial barriers to relief, but he went on to say [7] :

Although it is correct to say that repudiation by the tenant gives the landlord at that time a choice between holding the tenant to the lease or terminating it, yet at the same time a right of action for damages then arises; and the election to insist on the lease or to refuse further performance (and thus bring it to an end) goes simply to the measure and range of damages. I see no logic in a conclusion that, by electing to terminate, the landlord has limited the damages that he may then claim to the same scale that would result if he had elected to keep the lease alive. With great respect, that approach seems to me to go beyond the principles of anticipatory breach as understood in this country. An election to bring a lease to an end seems to me to be a condition of liability and not simply a factor relevant to "the measure and range of damages". A right of action for damages has not been thought to arise until the innocent party elects to accept the repudiation. Bowen L.J. said in Johnstone v. Milling [8] : It would seem on principle that the declaration of such intention by the promisor is not in itself and unless acted on by the promisee a breach of the contract; and that it only becomes a breach when it is converted by force of what follows it into a wrongful renunciation of the contract. A promisor cannot, by repudiating his obligations, unilaterally alter the legal relationships between himself and the promisee. Until the promisee accepts the repudiation, the rights and obligations arising from the partial execution of the contract and causes of action that accrue from its breach continue unaffected: McDonald v. Dennys Lascelles Ltd. [9] . The promisee's acceptance of the repudiation is an essential element in the cause of action for damages for anticipatory breach. That is because the liability in damages is substituted for the executory obligations to which acceptance of repudiation puts an end. Lord Diplock explained in Lep Air Services Ltd. v. Rolloswin Investments Ltd. [10] : Generally speaking, the rescission of the contract puts an end to the primary obligations of the party not in default to perform any of his contractual promises which he has not already performed by the time of the rescission. It deprives him of any right as against the other party to continue to perform them. It does not give rise to any secondary obligation in substitution for a primary obligation which has come to an end. The primary obligations of the party in default to perform any of the promises made by him and remaining unperformed likewise come to an end as does his right to continue to perform them. But for his primary obligations there is substituted by operation of law a secondary obligation to pay to the other party a sum of money to compensate him for the loss he has sustained as a result of the failure to perform the primary obligations. This secondary obligation is just as much an obligation arising from the contract as are the primary obligations that it replaces 1. (1971) 17 D.L.R. (3d) 710. 2. (1971) 17 D.L.R. (3d), at p. 721. 3. (1886) 16 Q.B.D. 460, at pp. 472-473. 4. (1933) 48 C.L.R. 457, at p. 477. 5. [1973] A.C. 331, at p. 350.

Acceptance of a surrender by a lessee who has repudiated a lease is at once an acceptance of the repudiation and a determination of the lessee's interest in the land. Where the lessee repudiates but does not give up possession, a lessor's acceptance must take some other form. Unless the lessee's interest in the land is determined in some way, there can be no rescission of the contract, for the lessee continues to enjoy the benefit of the demise and to be liable to perform at least those covenants which touch and concern the land. So long as the lessee retains the interest which he took under the demise, neither party can put an end unilaterally to the executory obligations under the lease. Total Oil Great Britain Ltd. v. Thompson Garages (Biggin Hill) Ltd. [11] was an instance of a lessor, an oil company, failing to observe the credit terms for the supply of petrol contained in a lease of a tied service station. It was held that the service station operator, remaining in possession of the site, was not entitled to put an end to the tie, though it was not enforceable by the oil company until the company mended its ways. Edmund Davies L.J. said [12] :

The defendants were admitted to the premises solely upon the terms of the lease containing several components which are unseverable, in my judgment. They stand or fall together. Despite the repudiation by the plaintiffs of part of the lease and the defendants' acceptance thereof, I cannot accept that, as to the latter's occupancy during the remainder of the 14-year term, they would be able to say, "We are entitled to remain in possession without regard being paid to where we obtain our petrol supplies." 1. [1972] 1 Q.B. 318. 2. [1972] 1 Q.B., at p. 325.

Where the lease is liable to forfeiture, as it was in the present case, enforcing the forfeiture both determines the lessee's interest in the land and constitutes the lessor's election to accept the repudiation. Conversely, a waiver of the forfeiture constitutes the lessor's election to keep the lease on foot. It is not necessary to consider the possible effects of statutory restrictions on the enforcing of a forfeiture or of the granting of relief against forfeiture, except to bear in mind that the condition on which the lessee's liability in damages for repudiation arises is that he ceases to be liable to perform the executory obligations resting on him under the lease.

Once the lessee's interest is determined, there is no reason why damages should not then be recoverable, provided the lessor has not previously made an election to keep the lease on foot. Where it is necessary for a lessor to determine a lease by re-entry under a proviso for re-entry contained therein, does his reliance on the proviso evidence an election to keep the lease on foot? In Johnstone v. Milling [13] where the lease conferred a power on the lessee to give a notice putting an end to the term at the expiration of the first four years and the lease was determined accordingly, Lord Esher M.R. regarded the giving of the notice as indicative of an affirmation of the contract. He said [1] :

He did not renounce the lease or give up the premises. He did not do any act which affected the existence of the contract. He made no declaration of intention to treat it as rescinded except for the purpose of bringing his action upon it. On the contrary, at the time fixed by the contract he gave the requisite notice to determine the lease. The giving of the notice was to be seen in conjunction with the lessee's failure to renounce or give up the premises. His conduct as a whole affirmed the contract. A lessor is in a different position if the lessee remains in possession. In that event, a lessor who enforces a forfeiture in accordance with the lease as soon as he is entitled to do so after he has knowledge of the lessee's anticipatory breach cannot be taken to elect not to enforce a claim for damages. The mere continuance of the lease pending forfeiture is not an election either way. The election to be made by a lessor is between continuing to bind the lessee to performance of his executory obligations and putting an end to those obligations so that the substitutionary liability in damages will arise. Enforcing a forfeiture may be an effective means of accepting a repudiation by anticipatory breach, though the power to enforce the forfeiture may depend upon some other breach of covenant or upon some event (e.g., going into liquidation) which is no breach of covenant. 1. (1886) 16 Q.B.D. 460. 2. (1886) 16 Q.B.D., at pp. 468-469.

In the present case it was conceded that the service of the statement of claim determined the lessee's interest in the land. The statement of claim clearly accepted the lessee's repudiation and sought damages accordingly. Thus the elements of the lessor's cause of action were established. The assessment of damages by Lusher J. conformed to principle.

It was submitted that cl. 10.1 of the lease limits the damages recoverable by the lessor to damages for past breaches of covenant. The submission is not borne out by the language of the clause. The clause specifies the events on the occurrence of which the right to reenter arises and preserves "any claim which the Lessor may have against the Lessee in respect of any breach of the covenants to be observed or performed". A claim for damages for anticipatory breach answers precisely that description: see per Lord Diplock in Lep Air Services Ltd. v. Rolloswin Investments Ltd. [2] .

Perhaps there is a procedural difficulty in joining a claim for damages for anticipatory breach with a claim for possession where the service of the writ or other originating process is the means by which the forfeiture of the lease is enforced. In such a case, it may be objected that the cause of action for damages accrues contemporaneously with the service but after issue of the writ or other originating process: see Wigan v. Edwards [3] . No objection of this kind was taken to the award in the present case, and it is not necessary to consider it.

The facts and issues involved in this appeal are set out in the judgment of Mason J. Since I agree with Mason J.'s conclusions and am in general agreement with his reasoning and with the observations made by Wilson J. in his judgment, I can confine myself to a statement of my views on what I see as the main general questions of law involved. It is convenient to refer to the appellant as "the tenant" and to the respondent as "the landlord".

A lease for a term of years ordinarily possesses a duality of character which can give rise to conceptual difficulties. It is both an executory contract and an executed demise. Its origins lie in contract rather than in real property in that the lessee's remedies were originally restricted to a personal action against the lessor on his covenant to give enjoyment of the land (see Pollock and Maitland, History of English Law Before the Time of Edward I, 2nd ed. (1898; Cambridge University Press reprint, 1952), vol. 2, pp. 106-107; Holdsworth, History of English Law, 5th ed. (1942), vol. 3, pp. 213-214). In time, however, it became accepted that a lessee for a term, although denied "seisin" in the strict sense, had a right to "possession" which was an interest in the land that he was entitled to protect against third parties; initially by a limited writ in ejectment (quare eiecit infra terminum) framed in terms which restricted it to an action against a purchaser from the lessor and subsequently by the remedies afforded under the Statute of Gloucester and by a specialized action of trespass (de eiectione firmae) which, by the end of the Middle Ages, gave recovery, not merely of damages, but of possession of the land: cf. Litt. Ten., s. 324; Co. Litt., 200b; Pollock and Maitland, op. cit., vol. 2, p. 107ff., particularly p. 110; Holdsworth, op. cit., vol. 3, p. 214ff.; Challis' Law of Real Property, 3rd ed. (1911), pp. 63ff., 80, 98ff., Appendix I. Notwithstanding this legal protection of the lessee's interest in the land, chattels real were never incorporated into the strict system of feudal tenements. The interest of the lessee in the land was however accepted as analogous to a form of feudal tenure to the extent that some authorities expressed the view that the lessee was required to do fealty: see, e.g., Bracton , 27, 80; Challis , pp. 63-66, Appendix I.

As they developed, the contractual doctrines of frustration and termination for fundamental breach (or for repudiation) were not seen as applicable to an executed demise under which an interest or estate in land had actually passed to the tenant: see, e.g., Halloran v. Firth [4] and, on appeal, but cf. at p. 269; London & Northern Estates Co. v. Schlesinger [5] ; Total Oil Great Britain Ltd. v. Thompson Garages (Biggin Hill) Ltd. [6] ; Leightons Investment Trust Ltd. v. Cricklewood Property and Investment Trust Ltd. [7] , on appeal, but cf. at pp. 228ff., 236ff. The rationale of that approach was the perceived inappropriateness of those contractual doctrines to a leasehold estate viewed as analogous to a form of feudal tenure. On the other hand, the general trend in this century, particularly in relation to leases of urban premises, has been away from the type of lease which can realistically be so viewed. It has been towards the lease, at a commercial rental and for a shorter term, framed in the language of executory promises of widening content and diminishing relevance to the actual demise. It is apparent that the special rules of property law regarding chattels real are inadequate as the exclusive determinant of rights and liabilities under such modern leases. That being so, it has become necessary for courts to look somewhat more critically at the rational basis and justification of the traditional assumption that leases generally were beyond the reach of fundamental doctrines of the law of contract.

1. (1926) 26 S.R. (N.S.W.) 183, at p. 187; (1926) 38 C.L.R. 261, at p. 268. 2. [1916] 1 K.B. 20, at p. 24. 3. [1972] 1 Q.B. 318. 4. [1943] K.B. 493; [1945] A.C. 221, at pp. 233-235, 244-245.

The actual application to leasehold interests of the common law doctrines of frustration and termination for fundamental breach involves some unresolved questions which are best left to be considered on a case by case basis whereby adequate attention can be focused on particular problems which might be overlooked in any effort at judicial codification. One cannot however ignore the fact that the clear trend of common law authority is to deny any general immunity of contractual leases from the operation of those doctrines of contract law: see, e.g., National Carriers Ltd. v. Panalpina (Northern) Ltd. [8] ; Highway Properties Ltd. v. Kelly, Douglas & Co. Ltd. [9] ; Corbin, Contracts (1962), vol. 6, s1356; and see the cases cited in Brooking and Chernov, Tenancy Law and Practice in Victoria, 2nd ed. (1980), par. 211; D. M. McRae, Repudiation of Contracts in Canadian Law, Canadian Bar Review, vol. 56 (1978), p. 233 and J. T. Robertson, Frustrated Leases: No to Never-But Rarely if Ever, Canadian Bar Review, vol. 60 (1982), p. 619. At first impression, that trend may appear to represent a step back towards the medieval days when the lessee's interest under a term of years was seen as a mere right in personam to sue the lessor for breach of covenant. Upon analysis however, it involves no more than recognition of the fact that the analogy between a leasehold and a freehold estate is an imperfect one and of the related fact that, except perhaps in the quite exceptional case of a completely unconditional demise for a long term with no rent reserved (cf. Knight's Case [10] ), the leasehold estate cannot be divorced from its origins and basis in the law of contract (cf. per Atkin L.J., Matthey v. Curling [11] ): the lease should be seen as "resting on covenant" (or contractual promise) and it is "the contract and not the estate which is the determining factor": see per Isaacs J., Firth v. Halloran [12] quoting from Hallen v. Spaeth [13] . That trend should be followed in this Court and it should be accepted that, as a general matter and subject to one qualification, the ordinary principles of contract law are applicable to contractual leases. The qualification is that the further one moves away from the case where the rights of the parties are, as a matter of substance, essentially defined by executory covenant or contractual promise to the case where the tenant's rights are, as a matter of substance, more properly to be viewed by reference to their character as an estate (albeit a chattel one) in land with a root of title in the executed demise, the more difficult it will be to establish that the lease has been avoided or terminated pursuant to the operation of the ordinary principles of frustration or fundamental breach. Indeed, one may reach the case where it would be quite artificial to regard the tenant's rights as anything other than an estate or interest in land (e.g., a ninety-nine year lease of unimproved land on payment of a premium and with no rent, or only a nominal rent, reserved). In such a case, it may be difficult to envisage circumstances in which conduct of the tenant short of actual abandonment would properly be held to constitute repudiation or fundamental breach or in which anything less than a cataclysmic event such as the "vast convulsion" referred to by Viscount Simon L.C. in Cricklewood Property and Investment Trust Ltd. v. Leighton's Investment Trust Ltd. [14] would warrant a finding of frustration.

1. [1981] A.C. 675. 2. (1971) 17 D.L.R. (3d) 710. 3. (1588) 5 Co. Rep. 54b [77 E.R. 137]. 4. [1922] 2 A.C. 180, at pp. 199-200. 5. (1926) 38 C.L.R., at p. 269. 6. [1923] A.C. 684, at p. 690. 7. [1945] A.C., at p. 229.

The memorandum of lease in the present case was for five years at a commercial rental without a premium. The consideration which the tenant gave for the demise was in the form of executory covenants. As a matter of substance, the rights of the tenant can also readily be seen as "resting on covenant" since, the memorandum of lease being unregistered, any equitable term which it created was founded upon what equity saw as an agreement to grant a lease in terms of the unregistered memorandum: see, generally, Walsh v. Lonsdale [15] ; Australian Provincial Assurance Ltd. v. Rogers [16] ; National Trustees, Executors and Agency Co. of Australasia Ltd. v. Boyd [17] ; National Carriers Ltd. v. Panalpina (Northern) Ltd. [18] ; Hewett v. Court [19] . In that regard, one needs to be mindful of the danger of over-emphasizing the equivalence of the equitable estate under an agreement for lease or an unregistered memorandum of lease followed by entry into possession and of a common law leasehold estate for the like term in that one can point to statements of authority which support the approach that the ordinary contractual doctrines of frustration and termination for fundamental breach would, in an appropriate case, operate to destroy the contractual foundation of such an equitable estate even if the view that they were not applicable at all to a common law lease had continued to prevail: see Coatsworth v. Johnson [20] (per Lindley L.J.); Swain v. Ayres [21] (per Lord Esher M.R.) [22] (per Lindley L.J.) and [23] (per Lopes L.J.), and Dimond v. Moore [24] . Be that as it may however, once it is accepted that the principles of the law of contract governing termination for fundamental breach are, as a matter of theory, applicable to leases generally, there is no difficulty in applying them in the present case in much the same fashion as to an ordinary executory contract: "[i]f the contract is avoided or dissolved the estate in land falls with it": per Lord Wright, Cricklewood Property and Investment Trust Ltd. v. Leighton's Investment Trust Ltd. [25] .

1. (1882) 21 Ch.D. 9. 2. (1943) 43 S.R. (N.S.W.) 202, at pp. 205-206. 3. (1926) 39 C.L.R. 72, at pp. 81-82. 4. [1981] A.C., at pp. 690, 704. 5. (1983) 149 C.L.R. 639, at p. 666. 6. (1886) 55 L.J.Q.B. (N.S.) 220, at p. 223. 7. (1888) 21 Q.B.D. 289, at p. 294. 8. (1888) 21 Q.B.D., at p. 295. 9. (1888) 21 Q.B.D., at pp. 296-297. 10. (1931) 45 C.L.R. 159, esp. at pp. 186-187. 11. [1945] A.C., at p. 240.

While the question is not without difficulty, I agree with other members of the Court that the tenant's breaches of the memorandum of lease amounted, in the circumstances of the present case, to fundamental breach of contract. It is not now suggested that the tenant is entitled to rely upon any special statutory provision precluding or controlling re-entry or providing for relief against forfeiture. It follows that the landlord was entitled to terminate the lease and, in accordance with ordinary contractual principles, sue the tenant for damages for loss of the benefit of the tenant's covenant to pay future rent and outgoings. The question arises whether that right to sue for general damages for loss of bargain survived the landlord's action in exercising the contractual right of re-entry contained in cl. 10.1 of the memorandum of lease.

In Shevill v. Builders' Licensing Board [26] , it was held by the Court that the lessor in that case was entitled only to unpaid past rent upon termination of the lease pursuant to the exercise of a contractual right of re-entry for breach of the covenant to pay rent promptly. The basis of the decision was not, however, a rejection of the proposition that the ordinary principles of contract law were applicable to the lease. The decision turned upon the conclusion that the breaches of the covenant to pay rent in that case did not constitute repudiation or fundamental breach [27] . While the distinction between termination for fundamental breach and termination for a breach which the parties have agreed in advance would be such as to give rise to a right to terminate is not without difficulty (cf. Larratt v. Bankers and Traders' Insurance Co. Ltd. [28] ; Sotiros Shipping Inc. v. Sameiet Solholt (The "Solholt") [29] ), the majority's reasoning in Shevill [30] proceeded on an assumption that general damages for loss of the lease would have been recoverable if the lessee's failure to pay rent had, in the circumstances of that case, constituted repudiation or fundamental breach. The present case is in contrast to Shevill in that, as has been said, the tenant's breach of covenant constituted a fundamental breach of the memorandum of lease.

1. (1982) 149 C.L.R. 620. 2. (1982) 149 C.L.R., at p. 626ff. 3. (1941) 41 S.R. (N.S.W.) 215, at pp. 225-226. 4. [1983] 1 Lloyd's Rep. 605. 5. (1982) 149 C.L.R., at p. 628.

It follows from the foregoing that, in the circumstances which had arisen, the landlord had both a contractual right to terminate the lease by re-entry under cl. 10.1 for breach of covenant and, on the application of the ordinary principles of contract law, a common law right to terminate for fundamental breach. The landlord was not obliged to elect between the two grounds for terminating the lease: it was entitled to rely upon them both. A party entitled to terminate a contract for repudiation or fundamental breach may rely upon both a specific contractual right to terminate the contract and the common law right to terminate unless, as a matter of construction, the former excludes the latter: see, e.g., Rawson v. Hobbs [31] ; Shepherd v. Felt and Textiles of Australia Ltd. [32] and, generally, the cases referred to in Carter, Breach of Contract (1984), pars. 914, 1006. More specifically, where a contractual right to terminate for past breach and the common law right to terminate for repudiation or fundamental breach exist concurrently, the reliance upon the contract involved in the exercise of the contractual right to terminate will not preclude the recovery of damages for loss of the future benefit of the contract by reason of repudiation or fundamental breach unless the contract expressly or impliedly so provides: cf. Yeoman Credit Ltd. v. Waragowski [33] .

1. (1961) 107 C.L.R. 466, at p. 480. 2. (1931) 45 C.L.R. 359, at pp. 377-378. 3. [1961] 1 W.L.R. 1124; [1961] 3 All E.R. 145.

Clause 10.1 of the memorandum of lease in the present case did not preclude the common law right to sue for fundamental breach. To the contrary, it expressly provided that the landlord's exercise of the right of re-entry thereunder would be "without prejudice to any claim which the Lessor may have against the Lessee in respect of any breach of the covenants and provisions in this Lease on the part of the Lessee to be observed or performed". That being so, the exercise by the landlord of the right of re-entry under cl. 10.1 did not deprive it of the right to claim damages for the loss of the future benefit of the tenant's covenant to pay rent which it sustained by reason of the tenant's fundamental breach of the provisions of the lease.

I agree with the reasons for judgment of Mason J. and with the additional observations made by Wilson and Deane JJ. There is nothing which I wish to add.