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[2026] NSWCA 78
respondent. Leave to appeal refused with costs.
The Court of Appeal did not decide a further appeal about the parties' lease dispute. It decided only whether the applicant should be allowed to bring that appeal. The landlord argued that a lease clause about flood damage applied only to damage occurring after the renewed lease began, and that the tenant should not have received repayment of rent without establishing a basis for restitution. The Court considered the lease argument unpersuasive when the lease was read as a whole, but did not finally determine the restitution issue. It refused leave because the proposed appeal did not establish a sufficient reason for reconsideration and the likely legal costs would be far greater than the small sums in dispute. The refusal was with costs.
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2,423 words · generated 08/10/2026
The decision concerns an application for leave to appeal, not a final appellate determination of the underlying lease dispute. The applicant was the trustee for Dawson Street Unit Trust, trading as Dawson Street Auto Centre Pty Ltd. It owned a disused service station property at 49 Dawson Street, Lismore. The respondent, 4Cyte Pathology Pty Ltd, leased the property to operate a drive-through coronavirus testing centre. The lease began on 16 August 2021 for an initial one-year term: [2].
5 cited instruments linked from this judgment.
Severe floods affected Lismore in February and March 2022. The March floods caused more substantial damage, leaving the internal area of the property unusable. From April 2022 the tenant used a portable office installed on the property at its own expense, and it did not return to using the internal area: [3]. The tenant exercised an option to renew in July 2022. Under cl 32 of the original lease, that created a further lease on the same terms, subject to the stated exception, expiring on 15 August 2023: [4].
After government funding for coronavirus testing ended and demand fell, the tenant stopped operating at the site in October 2022. It then gave the landlord a notice requiring it to rectify the flood damage and sought a rent abatement. The landlord had not repaired the property or allowed an abatement by February 2023. The tenant gave notice that it would terminate the lease from 1 March 2023, relying on the alleged failure to repair, and paid rent up to that date. The property was repaired by May 2023: [4]-[5].
In the Local Court, the landlord claimed $22,656 for rent said to be owing between 1 March and 15 August 2023, plus interest. The tenant denied liability because it said the lease had been validly terminated. It also cross-claimed for repayment of rent, relying on the lease's abatement provisions. The magistrate dismissed the landlord's claim and awarded the tenant $7,778.98 plus interest. The award reflected an abatement calculated at $16.06 per day from the flooding until 8 February 2023, followed by a 100 per cent abatement to 1 March 2023: [6]-[7].
The landlord appealed to the Supreme Court on questions of law under s 39(1) of the Local Court Act 2007 (NSW). That appeal failed. It then sought leave to appeal from the Supreme Court decision. Because the dispute was below the monetary threshold for an appeal as of right, leave was required under s 101(2)(r) of the Supreme Court Act 1970 (NSW): [8]-[10]. Free JA determined the application on the papers; Mitchelmore JA agreed: [1], [10]. The Court refused leave with costs: [30].
The Court applied the established threshold for leave described at [11]. Ordinarily, a proposed appeal must raise an issue of principle or public importance, or seek to remedy a reasonably clear injustice that goes beyond something merely arguable. The Court must also be persuaded that the decision is attended with sufficient doubt to justify reconsideration.
The first proposed issue concerned cl 4 of the Further Lease, which dealt with damage to the premises. The landlord argued that cl 4(b), because it used future-tense language, applied only to damage occurring during the term of the Further Lease. On that approach, the flood damage from March 2022 pre-dated the renewed lease, so the clause would not require the landlord to repair it: [14]-[16].
The Court considered this argument in the context of the lease as a whole, including its Special Conditions. Those conditions required the landlord to maintain structural elements and repair structural defects in a timely fashion: [17]-[18]. The Court considered it commercially improbable that those obligations would have meaning while the building remained unusable because of earlier damage, yet the landlord had no responsibility to address that damage: [18]. In its view, the primary judge was entitled to read cl 4(b) as applying to existing damage as well as future damage: [19]-[20].
The words “shall be destroyed or damaged” did not, in the Court's view, establish that the relevant damaging event had to occur after commencement of the Further Lease. The clause could refer to the future condition of the premises, even if the event causing that condition occurred earlier: [21]. Nor did the heading to the Special Conditions make their substantive obligations irrelevant to the interpretation of cl 4. The Court noted that the conditions overlapped in subject matter with cl 4 and included obligations expressed to be additional to cl 7: [22].
The Court acknowledged that applying cl 4(b) to pre-existing damage meant that the landlord could, on the text, have had a right to terminate the lease immediately under cl 4(b)(i). It considered that possibility unusual, but more commercially practical than the landlord's proposed reading, which would leave the tenant paying rent for unusable premises while the landlord had no repair obligation under the relevant provisions: [23]. The Court did not grant leave on this ground because it considered the landlord's construction argument insufficient to demonstrate reasonably clear injustice beyond something merely arguable: [20].
A separate issue concerned the point in time at which surrounding circumstances should be considered. The landlord argued that the agreement to create the Further Lease was made when the Original Lease was agreed, subject to the option being exercised. It therefore challenged the primary judge's consideration of circumstances existing when the option was exercised in July 2022: [24]. The Court recognised that this raised a point of principle with potential broader significance, but considered it unlikely to decide the construction issue in this case. The presence of a point of principle did not overcome the other reasons against leave: [24]-[25].
The rent-abatement ground also raised an argument about principle. The landlord submitted that the award was restitutionary and that the tenant had not pleaded or proved a qualifying or vitiating factor, such as mistake or duress. It relied on authorities addressing restitution, including Farah Constructions, David Securities, Mann and Redland City Council: [26]. The tenant said that the award was instead justified as contractual damages because the lease gave it a right to abatement: [27].
The Court did not decide which characterisation was correct. It assumed in the landlord's favour that the award was restitutionary and accepted that, on that assumption, the proposed appeal had a firmer basis for raising a general question of principle: [28]-[29]. It nevertheless refused leave. The claimed sums were small, and the likely appeal costs would be grossly disproportionate. The Court regarded finality considerations as overwhelming: [29]-[30].
The judgment applies, rather than purports to change, the leave-to-appeal principles stated in earlier authorities. At [11], it refers to Be Financial and Secretary, Department of Family and Community Services (NSW) v Smith for the ordinary requirement that an appeal raise a point of principle or public importance, or address reasonably clear injustice beyond a merely arguable complaint. It also refers to Sharpe v Heywood for the requirement that the decision be attended with sufficient doubt to warrant appellate reconsideration.
At [12]-[13], the Court explains that proportionality is relevant both to the statutory requirement for leave and to the exercise of the discretion. It refers to Cheng, which discussed the importance of keeping the value of a dispute proportionate to the costs of resolving it, and to the public interest in efficient use of court time. It also cites Be Financial and Burrows in support of the weight given to disproportionate costs and finality where small sums are at stake.
The judgment does not announce a new general rule that every lease clause using future-tense language applies to damage predating the lease. Its construction discussion is tied to the particular terms of cl 4, the Special Conditions, and the circumstances stated in the judgment: [16]-[23]. It explains why, on this lease and for the purposes of the leave application, the wording could encompass an existing damaged condition.
Similarly, the judgment does not decide a new rule about restitution. It summarises the landlord's restitution argument and the authorities on which it relied, but expressly leaves the contractual-versus-restitutionary basis of the award unresolved: [26]-[29]. The operative result is procedural: leave was refused, so the proposed appeal did not proceed. The judgment does not alter the Local Court orders or finally determine the parties' substantive rights through a further appeal.
At [11], the Court says leave will ordinarily be granted where the proposed appeal raises an issue of principle or public importance, or seeks to address a reasonably clear injustice going beyond something merely arguable. In plain English, the fact that a party disagrees with a lower court's reasoning is not usually enough. The proposed appeal needs to meet a higher threshold.
At [13], the Court says there is “a special interest in finality when small sums are at stake”. This reflects the judgment's concern that appeals can consume legal costs and court resources far beyond the value of the dispute. It does not mean that small claims can never raise important legal issues; it means that the amount and likely costs are relevant to whether leave should be granted.
At [18], the Court reasons that the landlord's proposed interpretation would sit poorly with Special Conditions requiring maintenance of structural elements and timely repair of structural defects. In plain English, the Court considered the lease language as a connected whole. It thought it improbable that the landlord's repair obligations would operate for ordinary structural defects but not where earlier flooding had left the building unusable.
At [21], the Court explains that the words “shall be destroyed or damaged” could refer to the condition of the premises, rather than requiring the damaging event itself to occur during the lease term. The practical point is that the date when damage occurred and the date when the premises remained damaged were distinct matters in the Court's analysis. That reasoning was applied to the text before it, not stated as a universal rule for all leases.
At [24], the Court recognises that the proper date for assessing surrounding circumstances could raise a point of principle. But it says that the issue was unlikely to be decisive on the construction question in this case. The passage illustrates that identifying a potentially important legal issue does not automatically establish that leave should be granted.
At [28]-[29], the Court says it was unnecessary to decide whether the rent-abatement award was restitutionary or contractual. It assumed the landlord's preferred characterisation for the purpose of considering leave, then refused leave because of the small amount and disproportionate likely costs. The passage is important because it marks the limit of the decision: it does not resolve the restitution argument on its merits.
The decision is most directly relevant to applications for leave to appeal where the amount in dispute is below the statutory threshold for an appeal as of right. It explains that courts considering leave may look not only at the nature of the proposed legal issue, but also at the value of the dispute, likely appeal costs, further litigation costs and the public interest in finality: [9], [12]-[13], [25], [29].
It may also be relevant where a proposed appeal challenges the construction of a commercial lease, especially where one clause must be read alongside special conditions dealing with maintenance, repair or reinstatement. The decision shows the Court considering text, context, the lease as a whole and the practical consequences of rival interpretations: [18]-[23]. Its reasoning is specific to the clauses quoted in this judgment. It should not be treated as deciding how a different lease, with different wording or conditions, must be construed.
The case also identifies a possible issue where a renewed lease repeats the terms of an earlier lease, but the leased premises are already damaged when the option is exercised. The dispute raised whether a clause referring to premises that “shall be destroyed or damaged” addressed only future damage, or also a damaged condition that already existed: [14]-[21]. The Court's conclusion was reached in deciding whether leave should be granted, not after a full determination of a further appeal.
Finally, the decision may be relevant where a proposed appeal raises a general restitution question but the amount involved is modest. It shows that even a potentially principled issue may not be enough to justify leave when the costs of appellate litigation are likely to be grossly disproportionate: [28]-[29]. The judgment does not determine the elements of the tenant's restitution claim or whether mistake, duress or another vitiating factor was required on the facts.
The judgment is dated 8 May 2026, with a coversheet correction dated 13 May 2026. The material provided contains no later judgments or citations showing how subsequent courts have treated this decision. Its later treatment therefore cannot be assessed from the text supplied.
The cases cited in the judgment are earlier authorities, not later treatment of this decision. They provide the legal context for the Court's reasoning. For example, Cheng is cited in relation to proportionality and finality, while Farah Constructions, David Securities, Mann and Redland City Council are cited in connection with the landlord's restitution argument: [12]-[13], [26]. The Court did not use those restitution cases to decide whether the tenant's award was restitutionary or contractual.
The judgment leaves unresolved whether the magistrate's rent-abatement award was properly characterised as contractual damages or restitutionary relief. The Court deliberately found it unnecessary to decide that question when determining leave: [27]-[29]. It consequently did not decide whether the tenant needed to plead and establish mistake, duress or another qualifying factor for the repayment awarded.
The Court also did not resolve the broader question of when surrounding circumstances should be assessed where a lease renewal option is exercised after the original agreement was made. It acknowledged that the issue could have broader significance but considered it unlikely to determine construction in this case: [24].
The effect of cl 4(b) on the parties' substantive rights was not finally decided through a further appeal. The Court's analysis explains why the proposed construction did not establish a sufficient basis for leave, but the application's procedural disposition was refusal of leave: [20], [30]. The judgment does not establish how differently worded lease provisions, other repair obligations, or different renewal arrangements would be construed.
This is general legal information, not legal advice. Zoe can make mistakes. Before acting on this, relying on it, or using any draft, have it checked by a qualified Australian lawyer.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: The trustee for Dawson Street Unit Trust trading as Dawson Street Auto Centre Pty Ltd v 4Cyte Pathology Pty Ltd [2026] NSWCA 78
Hearing dates: 6 May 2026
Date of orders: 8 May 2026
Decision date: 08 May 2026
Before: Mitchelmore JA at [1]; Free JA at [2]
Decision: Leave to appeal refused with costs.
Catchwords: APPEALS — leave to appeal — principles governing — obligation under lease to rectify flood damage — question of construction — points of principle identified — no reasonably clear injustice going beyond something that is merely arguable — costs grossly disproportionate to amounts in issue — special interest in finality where small sums at stake — leave to appeal refused
Legislation Cited: Local Court Act 2007 (NSW), s 39
Supreme Court Act 1970 (NSW), s 101(2)(r)
Cases Cited: Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164
Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd [2021] NSWCA 148
Cheng v Motor Yacht Sales Australia Pty Ltd t/as The Boutique Boat Company (2022) 108 NSWLR 342; [2022] NSWCA 118
David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; [1992] HCA 48
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22
Mann v Paterson (2019) 267 CLR 560; [2019] HCA 32
Gurr v Robinson (Court of Appeal (NSW), Kirby P, Hope and Samuels JJA, 10 February 1986, unreported)
Redland City Council v Kozik (2024) 281 CLR 202; [2024] HCA 7
Secretary, Department of Family and Community Services (NSW) v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206
Sharpe v Heywood [2013] NSWCA 192
Category: Principal judgment
Parties: Dawson Street Auto Centre Pty Ltd atf Dawson Street Unit Trust (Applicant)
4Cyte Pathology Pty Ltd (Respondent)
Representation: Counsel:
C Simpson (Applicant)
S Docker SC / T Bateman (Respondent)
Solicitors:
Somerville Laundry Lomax (Applicant)
Twomey Dispute Lawyers (Respondent)
File Number(s): 2025/491353
MITCHELMORE JA: I agree with Free JA.
FREE JA: As of August 2021, the trustee for Dawson Street Unit Trust trading as Dawson Street Auto Centre Pty Ltd (applicant) owned land at 49 Dawson Street, Lismore (Property). The Property was a disused service station, with a secure internal area and a large driveway and apron area. By deed of lease dated 16 August 2021 (Original Lease) the applicant leased the Property to 4CYTE Pathology Pty Ltd (respondent), for an initial term of one year. The respondent was at that time operating coronavirus testing centres throughout the Northern Rivers and Queensland. The Property was leased for the purpose of operating a drive through testing centre in Lismore.
In February 2022 and again in March 2022 Lismore experienced severe flooding. In the February 2022 floods the Property suffered some damage. More significant damage was caused in the March 2022 floods. The internal area of the Property was rendered unusable. From 19 April 2022 the respondent operated from a portable office installed on the Property at its own expense. It did not resume using the internal area at any point thereafter.
The Original Lease included an option for the respondent to renew the lease for a further year. In July 2022 the respondent exercised the option. Pursuant to cl 32 of the Original Lease, that had the effect of creating a further lease on the same terms as the Original Lease (save for cl 32 itself), expiring on 15 August 2023 (Further Lease). By October 2022 government funding for coronavirus testing was no longer available and demand for testing dropped. The respondent ceased operating the testing facility at the Property from around 21 October 2022. On 31 October 2022 it issued to the applicant a reinstatement notice under the Further Lease, requiring that the applicant rectify the flood damage to the Property. The respondent also demanded an abatement of rent, pursuant to the Further Lease, on the basis that the Property was damaged and had not been repaired.
By February 2023 the applicant had not undertaken repairs to the Property. Nor did it allow an abatement of rent. On 8 February 2023 the respondent advised the applicant that it was terminating the lease with effect from 1 March 2023, on the basis that such termination was authorised by the failure to repair. The respondent paid rent under the Further Lease up to and including 1 March 2023. The applicant subsequently undertook repair works and the building on the Property was repaired by May 2023.
The applicant brought proceedings in the Local Court seeking to recover $22,656.00, which was the amount of rent that would have been due for the period between 1 March 2023 and 15 August 2023, plus interest at the prescribed rate of 10 percent. The respondent denied that it was under any obligation to pay rent for the period after 1 March 2023, because the lease was validly terminated. The respondent cross-claimed seeking the repayment of the rent that it had paid since the Property was flood-damaged, on the basis that it was entitled to an abatement of rent.
Leave to appeal will ordinarily be granted only when the proposed appeal raises an issue of principle or a question of public importance, or seeks to address a reasonably clear injustice going beyond something that is merely arguable: Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164 (Be Financial) at [32]-[38]; Secretary, Department of Family and Community Services (NSW) v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206 at [28]. An essential prerequisite of a grant of leave to appeal is that the Court be persuaded that the decision appealed from is attended with sufficient doubt to warrant its reconsideration on appeal: Sharpe v Heywood [2013] NSWCA 192 at [34].
The monetary limit for appeals as of right in s 101(2)(r) of the Supreme Court Act reflects the need to guard against appeals in which there is disproportionality between the value of the matter at issue and the cost of protracted litigation, both to the parties concerned and to the system more generally. In Cheng v Motor Yacht Sales Australia Pty Ltd t/as The Boutique Boat Company (2022) 108 NSWLR 342; [2022] NSWCA 118 (Cheng) Bell CJ (with whom Ward P and Basten AJA agreed) at [17] emphasised the importance of proportionality between the monetary amount at issue and the costs of proceedings. His Honour quoted with approval the statement of Kirby P in Gurr v Robinson (Court of Appeal (NSW), Kirby P, Hope and Samuels JJA, 10 February 1986, unreported) that the requirement for leave to appeal where small sums are involved also reflects a number of public interests which must be protected by the Court, including the “discouragement of litigation, the principal purpose of which is to recover an order for costs, and the efficient and cost effective use of court time, which necessarily involves large public costs”. Bell CJ said in Cheng at [20]:
The need for and desirability of there being proportionality between the value of the matter or amount in issue, and the costs of litigating that matter or issue is also reflected in s 60 of the Civil Procedure Act 2005 (NSW), which provides that “[i]n any proceedings, the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute.”
The applicant seeks leave to argue that the primary judge misconstrued the Further Lease. The draft notice of appeal contains three grounds of appeal directed to this point. As the applicant submits, they are aspects of the same ultimate issue – did clause 4 of the Further Lease apply to destruction or damage occurring prior to the creation or commencement of the Further Lease?
By the first proposed ground of appeal the applicant contends that the primary judge erred in finding that there was ambiguity in the wording of the Further Lease, or a constructional choice that needed to be made, such as to justify consideration of the surrounding circumstances. The second proposed ground of appeal is that the primary judge erred in any event in having regard to the circumstances that existed on 22 July 2022 (when the option was exercised to renew the lease) rather than those existing in August 2021 when the terms of the Original Lease were agreed. By the third proposed ground of appeal the applicant contends that even if such surrounding circumstances are taken into account it is erroneous to construe the Further Lease as imposing an obligation to repair damage that existed prior to the commencement of the Further Lease.
The premise of the argument is that cl 4(b) of the Further Lease is expressed in a future tense and as such it is apt to apply only to destruction or damage that occurred during the term of the Further Lease. Clause 4 of the Further Lease provides:
4 Damage to Premises
(a) If the premises are, or the building (if any) of which they form part is damaged, the Lessor is not obliged to repair or reinstate the premises or that building.
(b) If the premises (or the building, if any, of which they form part) shall be destroyed or damaged so as to render the premises unfit for occupation and use by the Lessee for the purposes of the Lessee’s business then:
(i) the Lessor may at any time thereafter by written notice to the Lessee terminate this lease without compensation; and
(ii) if the Lessor shall fail to rebuild or reinstate the premises (or the building, if any, of which they form part) within a reasonable time after having received written notice from the Lessee requiring the Lessor so to do then the Lessee may at any time thereafter by written notice to the Lessor terminate this lease without compensation.
(c) Any such termination shall be without prejudice to the rights of either party in respect of any antecedent breach matter or thing;
(d) Upon the happening of any such destruction or damage the rent payable under this lease or a proportionate part thereof according to the nature and extent of the damage sustained shall abate until the premises have been made fit for occupation and use by the Lessee for the purposes of the Lessee’s business or until this lease has been terminated pursuant to Clause 4(b).
(e) If the Lessor and the Lessee do not agree as to the amount of rent to be so abated that amount shall be determined by a person appointed by agreement between the Lessor and the Lessee or, failing such agreement, appointed by the President of the NSW Division of the Australian Property Institute.
(f) The person making such determination shall be acting as an expert and not as an arbitrator and the costs of the determination shall be paid as to one half by the Lessor and as to one half by the Lessee.
Maintenance, Repair and Refurbishment (Other than in the provisions of Conditions 4 & 7)
The Lessor must maintain the structural elements of the roof, the ceiling, the external walls, flooring foundation, and must repair structural defects in a timely fashion.
The Lessor must maintain essential services already present. The Lessor is not required to maintain any services installed by the Lessee.
For Clarity in addition to all the obligations of Clause 7 and in respect to “The Rules” as prescribed in Clause 31 being asserted by The Lessor.
The Lessee must at its own expense maintain all fixtures and fittings, doors, windows, locks, handles including light fittings and wash bay/amenity facilities in at least the condition that they were in when the Lessee first occupied the premises.
…
As the primary judge correctly stated, it is necessary to construe cl 4(b) in the context of the Further Lease as a whole, including the Special Conditions. His Honour was satisfied that the Special Conditions plainly imposed obligations on the Lessor in respect of the condition of the building on the Property which would be engaged in respect of past as well as future damage. That being the case, the Special Conditions did not sit well with the proposition that cl 4(b) imposes no obligations where the premises have been rendered unfit for occupation and use by damage occurring prior to the commencement of the lease. An obligation on the lessor pursuant to the Special Conditions to maintain the structural elements of the premises and repair structural defects in a timely fashion would be commercially nonsensical, or at least improbable, if the premises were in an unusable condition because of earlier damage and the lessor was under no obligation to rectify such damage.
His Honour was satisfied that on its proper construction cl 4(b) of the Further Lease applied to extant damage as well as future damage. On that basis it applied to the flood damage that had occurred to the Property in March 2022. This conclusion was reinforced by the surrounding circumstances that existed when the respondent had exercised the option to renew the lease. Those circumstances, known to both parties, included that the premises had been rendered unusable by flood damage and there was a need for the premises to be reinstated by the applicant, but this had not occurred.
The applicant has not demonstrated, for the purposes of its application for leave to appeal, that this conclusion on the question of contractual construction involves a reasonably clear injustice going beyond something that is merely arguable. The applicant’s argument as to the operation of cl 4(b) involves a textual analysis that is divorced from the context of the Further Lease as a whole and would lead to a commercially improbable result.
When cl 4(b) is compared with cl 4(a), it is apparent that those two subclauses serve to differentiate between damage to the premises that does not render the premises unfit for occupation and use (in which case the Lessor is not obliged to repair or reinstate the premises) and damage that does render the premises unfit for occupation and use (in which case different consequences follow, including if the Lessor fails to rebuild or reinstate the premises once requested to do so). Contrary to the applicant’s submission, the words used in cll 4(a) and 4(b) do not make clear that the only forms of destruction or damage that can engage the subclauses are those that occur after the lease has commenced. It is not decisive to observe, as the applicant does, that the words are used in a future conditional tense. Where cl 4(b) describes the consequences that follow if the premises “shall be destroyed or damaged” the words used are capable of being read as referring to the condition of those premises in the future (ie their condition as being destroyed or damaged to the requisite degree), even if the causative event occurred earlier and even if the condition also existed at some earlier point in time.
The primary judge was satisfied that there was no legal error in the magistrate awarding $7,778.98 (plus interest) to the respondent for rent that was paid in circumstances where the respondent was entitled to an abatement of rent. The applicant argues that this conclusion was unwarranted because relief was awarded on a restitutionary basis without the respondent having established a proper basis for such relief. The applicant relies on the principle that “whether enrichment is unjust is not determined by reference to a subjective evaluation of what is unfair or unconscionable: recovery rather depends on the existence of a qualifying or vitiating factor falling into some particular category”: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at [150]; see also David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 379; [1992] HCA 48; Mann v Paterson (2019) 267 CLR 560; [2019] HCA 32 at [168]; Redland City Council v Kozik [2024] HCA 7; (2024) 98 ALJR 544 at [73]. The applicant argues that in the present case the respondent did not plead or prove that it had paid rent because of a mistake or because it was under duress. Nor did it point to any other qualifying or vitiating factor that would justify restitution.
The respondent resists the premise and says that the award of compensation by the magistrate was justified as contractual damages, because the respondent had an entitlement under the Further Lease to abatement of rent.
It is unnecessary to resolve the debate about the underlying basis for the award of compensation by the magistrate. Even on the assumption, favourable to the applicant, that the relief was restitutionary, a grant of leave is not warranted.
On that favourable assumption, the applicant has a firmer foundation on this limb of the proposed appeal to argue that a question of general principle arises and that the answer to that question would likely be decisive if leave were granted. However, this is not an appropriate case in which to grant leave to appeal on the basis that the appeal would involve consideration of such a point of principle. An appeal would involve the parties incurring costs that would be, in all likelihood, grossly disproportionate to the amount in issue. As noted above, there is a special interest in finality where small sums are at stake. Here the stakes are especially small and considerations of finality are overwhelming.
Leave to appeal should be refused, with costs.
**********
Corrected coversheet which previously described Mr Docker SC as acting for the applicant rather than the respondent.
The trustee for Dawson Street Unit Trust trading as Dawson Street Auto Centre Pty Ltd
4Cyte Pathology Pty Ltd
(2022) 108 NSWLR 342
(1992) 175 CLR 353
(2007) 230 CLR 89
(2019) 267 CLR 560
(2024) 281 CLR 202
(2017) 95 NSWLR 597
(2024) 98 ALJR 544
Leave to appeal refused with costs.
The claim of the applicant in the Local Court failed, on the basis that the Further Lease had been validly terminated. The presiding magistrate was satisfied that the applicant was in breach of its obligations to repair the flood damage to the Property, entitling the respondent to terminate the Further Lease. The respondent was partially successful on its cross-claim, with judgment for $7,778.98 (plus interest) entered in its favour. The cross-claim succeeded on the basis that there had been an overpayment of rent, as rent should have been abated at the rate of $16.06 per day from the time the Property was flood damaged until 8 February 2023. For the period from 8 February 2023 to 1 March 2023 the magistrate concluded that the rent should be abated by 100 percent.
The applicant appealed to the Supreme Court on questions of law, pursuant to s 39(1) of the Local Court Act 2007 (NSW). The applicant argued that the Further Lease, which ran from 16 August 2022, did not impose any relevant obligation to reinstate the Property, because the flood damage in issue had occurred in March 2022, before the Further Lease commenced. That argument, which turned on the construction of cl 4 of the Further Lease (read in the context of the Special Conditions to the Further Lease), was rejected by the primary judge. His Honour was satisfied that the respondent was obliged under the Lease to repair the damage to the Property, notwithstanding that the damage had occurred before the option was exercised and the Further Lease began. The applicant also argued that the respondent was not entitled to abatement of part of the rent that it had paid, on the basis that the magistrate had awarded restitutionary relief in circumstances where no relevant vitiating factor (such as mistake or duress) had been alleged and established that would warrant restitution. That argument was also rejected by the primary judge.
The applicant seeks to appeal from the decision of the primary judge on these points. As the applicant accepts, it requires leave to do so because the appeal does not involve a matter at issue amounting to, or of the value of, $100,000 or more. Nor is it a matter that involves (directly or indirectly) any claim, demand or question to or respecting any property or civil right amounting to, or of the value of, $100,000 or more. Leave is therefore required pursuant to s 101(2)(r) of the Supreme Court Act 1970 (NSW) (Supreme Court Act).
The application for leave was determined separately and on the papers. For the reasons which follow, leave should be refused.
The applicant suggests that the Special Conditions relating to maintenance, repair and refurbishment are entirely separate from cl 4, because the heading to the relevant special conditions is “Maintenance, Repair and Refurbishment (Other than the provisions of Conditions 4 & 7)”. However, that reference does not signify that the conditions are concerned with entirely separate and unrelated obligations. There is a clear overlap in subject matter. Moreover the special conditions explicitly include matters that are said to be “[f]or Clarity [sic] in addition to all the obligations of Clause 7”. The heading to the Special Conditions does not mean that the substantive obligations lose their significance as part of the context in which cl 4 must be construed.
As the applicant correctly points out, construing cl 4(b) as applying to damage that pre-dates the Further Lease has the consequence that the lessor would have been entitled to terminate the lease immediately pursuant to cl 4(b)(i). While that may be seen as a somewhat unusual arrangement, it is more commercially practical than the outcome which would flow from the applicant’s alternative construction. On that construction, from the commencement of the Further Lease, the lessor had no obligations of repair and the lessee was obliged to pay rent under the lease even though the premises the subject of the lease were unsuitable for occupation and use for the purposes for which they were leased.
The applicant highlights a point of principle about the appropriate time at which to assess the “surrounding circumstances” bearing on the interpretation of the Further Lease (to the extent that it is found to be appropriate to have regard to those circumstances). The point arises because, on the applicant’s approach, the agreement to create the Further Lease, while conditional on the exercise of the option, was made at the time the Original Lease was agreed. That being so, the applicant submits, it was inappropriate to refer, as the primary judge did, to the surrounding circumstances that existed when the option was later exercised. Viewed in isolation, that is a point of principle the resolution of which could potentially also have broader significance. However, in the context of this case the issue is unlikely to be decisive on the question of construction. Given that factor and the other circumstances of this case, the fact that there is a point of principle embedded within at least one of the applicant’s proposed arguments does not justify a grant of leave.
A further consideration pointing against the grant of leave is the small sum of money involved. The applicant, if successful, seeks the unpaid rent between 1 March 2023 and 15 August 2023. At the time proceedings were commenced in the Local Court the amount sought, including interest, was $22,656.00. Even allowing for the fact that additional interest might now be recovered, the ultimate award of compensation to the applicant would be small, and would almost certainly be dwarfed by the cost of the appeal itself.