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[2022] VSC 766
General information, not legal advice.
Supreme Court of Victoria
2022-12-12
M Osborne J
Original judgment source is linked above.
INJUNCTIONS - Interlocutory injunction seeking to restrain landlord from re-entering premises - Prima facie case - Balance of convenience - Sufficiency of undertaking as to damages - Sudjalim Pty Ltd v Homle Pty Ltd [2020] VSC 838 - ABC v O'Neill [2006] HCA 46; (2006) 227 CLR 57 - Shercliff v Engadine Acceptance Corp Pty Ltd [1978] 1 NSWLR 729 - Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd [1981] HCA 75; (1981) 146 CLR 249 -
LANDLORD AND TENANT - Landlord's right to re-enter premises - Tenant's entitlement to abatement of rental - Relief against forfeiture - Whild v GE Mortgage Solutions Ltd [2012] VSC 212 - Primary RE Limited v Great Southern Property Holdings Ltd (Receivers and Managers appointed) (in liq) & Ors [2011] VSC 242 - Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268 - Horsey Estate Ltd v Steiger [1899] UKLawRpKQB 113; [1899] 2 QB 79 - Edex International Holdings Pty Ltd v Marmalade Films Pty Ltd (2003) 56 NSWLR 56 - Donnelly v Amalgamated Television Services Pty Ltd (1998) 45 NSWLR 570 - The Heat Group Pty Ltd v Paragon Care Ltd [2021] VSC 204 - Jam Factory Pty Ltd v Sunny Paradise Pty Ltd [1989] VicRp 54; [1989] VR 584.
1 By amended summons filed 17 November 2022, the plaintiffs, Vincent Cold Storage Pty Ltd and Vincent Transport Services Pty Ltd (collectively, 'the Tenants') seek, inter alia, an interlocutory injunction restraining the defendant, Centuria Property Funds No 2 Limited ('the Landlord') from re-entering or attempting to re-enter premises located at units 1 and 2, 102-128 Bridge Road, Keysborough in the State of Victoria ('the Premises'). In the alternative, the Tenants seek relief against forfeiture of the lease of the Premises entered into by the Tenants and the Landlord on 15 January 2020 ('the Lease'). The first plaintiff carries on a cold storage business from the Premises whilst the second plaintiff carries on a transport business based at the Premises.
2 On 10 October 2022, the Landlord issued the Tenants with a notice of default under s 146 of the Property Law Act 1958 (Vic) ('the PLA') ('the October Default Notice'). The October Default Notice was based on the Tenants' failure to pay rent and outgoings under the Lease which were said to total $736,947.11 (inclusive of GST) and which covered rental and outgoings payable for the period from 1 June 2022 to 31 October 2022.
3 Section 146(1) of the PLA provides:
146 Restrictions and relief against forfeiture of leases and under-leases
(1) A right of re-entry or forfeiture under any proviso or stipulation in a lease or otherwise arising by operation of law for a breach of any covenant or condition in the lease, including a breach amounting to repudiation, shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice -
(a) specifying the particular breach complained of; and
(b) if the breach is capable of remedy, requiring the lessee to remedy the breach; and
(c) in any case, requiring the lessee to make compensation in money for the breach -
and the lessee fails, within a reasonable time thereafter, or the time not being less than fourteen days fixed by the lease to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor, for the breach.
4 On 27 October 2022 the Landlord served the Tenants with a notice of termination of lease based upon the Tenants' failure to comply with the October Default Notice ('the Termination and Re-entry Notice'). The Termination and Re-entry Notice concluded with the words 'the Landlord hereby terminates the Lease and exercises its right to re-enter and take possession of the Premises pursuant to cl 16.2 of the Lease and s 146 of the PLA'. Security guards instructed by the Landlord attended the Premises and attempted to evict the Tenants without success.
5 By summons dated 31 October 2022, the Tenants made urgent application for an injunction restraining the Landlord from re-entering the Premises.[1] When the Tenants' application came before the Commercial Court duty judge, the Judge made procedural orders and the Landlord gave an undertaking in the form of the injunction sought by the Tenants.
6 On 9 November 2022, the Tenants' application came on for further hearing before the duty judge. Orders were made giving the Tenants leave to amend their summons to seek, in the alternative, relief against forfeiture and various procedural directions were made.
7 At that hearing, certain undertakings were given by the parties and various other matters were recorded in the notation to the orders under the heading 'Other Matters' as follows:
A. Upon the plaintiffs, by their counsel, undertaking to the Court:
- to pay the to pay the sum of $136,827.70 for outstanding outgoings under the lease between the parties dated 15 January 2020 contained in pages 54-96 of exhibit JBS-1 to the affidavit of James Bartholomew Shannon affirmed 31 October 2022 (the 'lease') within 14 days of this order being authenticated;
ii. to pay outgoings under the lease as and when they fall due;
to pay rent in the sum of $61,771.90 (incl GST) (being half rent due under the lease) on the first day of each calendar month in accordance with the lease; and
to abide by any order the Court may make as to damages in case the Court shall hereinafter be of the opinion that the proposed defendant shall have sustained any, by reason of these orders, which the plaintiffs ought to pay.
The Court was informed by counsel for the plaintiffs at the hearing, and by the terms of the plaintiffs' proposed form of order, that the plaintiffs consent to the defendant drawing on the amount of $794,390.52 (incl GST), said to be part of the Additional Incentive amount referred to in item 16 of the lease, to pay outstanding rent in the sum of $633,110.40 which was said to be the outstanding rent up to and including 31 October 2022.
The Court was informed by senior counsel for the defendant that the defendant does not accept the undertakings proffered by the plaintiffs, and does not accept that it is holding the Additional Incentive amount as security under the lease. The court was also informed that the defendant reserves all of its rights in connection with the subject matter of this proceeding and the lease.
The defendant by its senior counsel undertook to the Court that the defendant whether by itself, its agents, servants, employees or otherwise, would not re-enter or attempt to re-enter units 1 and 2, 102-128 Bridge Road, Keysborough, Victoria being the land more particularly described in Certificate of Title Volume 11344 Folio 516, until 4:00pm on Thursday 1 December 2022.
(a) James Bartholomew Shannon, solicitor, affirmed 31 October 2022 and 18 November 2022;
(b) the affidavit of Andrew Vincent affirmed 6 September 2022 and filed in proceeding number S ECI 2022 03471 ('the statutory demand proceeding'), which was exhibited to Mr Shannon's first affidavit) ('Vincent affidavit');
(c) the affidavit of Craig Smith (accountant) affirmed 18 November 2022.
9 The Landlord relies upon the following affidavits:
(a) Daryl Shawn Collins affirmed 3 November 2022, 24 November 2022 and 5 December 2022;
(b) Benjamin William Charles Renfrey sworn 7 November 2022; and
(c) Geoffrey James Stanfield affirmed 24 November 2022.
10 In addition, the Tenants adduced oral evidence on the application from Craig Vincent, the son of Andrew Vincent. Craig Vincent is the Tenants' general manager. He was cross-examined.
11 The Tenants have occupied the Premises since around 1 March 2019 initially pursuant to a licence and since 1 December 2019 pursuant to the Lease. The permitted use is specified as 'office, refrigerated warehouse, cold storage and distribution centre'. The Tenants' obligations under the Lease are guaranteed by Andrew Vincent.
12 The Lease is for a term of five years terminating 30 November 2024.
13 The commencing annual rent is $1,254,975 per annum (plus GST) plus the Tenants' proportion of outgoings (35.18%). The rent increases by 3.25% each year. The Lease includes an option for a further term of five years.
14 Clause 3.1 of the Lease provides that the Tenants pay the rent and all other charges payable under the Lease free from any deductions, counterclaims or setoff (whether arising at law or in equity) by direct debit and in equal monthly instalments in advance on the first day of each month.
15 Clause 5.2(a) of the Lease provides that 'if the Premises or any part of them are damaged so that the Premises are substantially unfit for the occupation and use of the Tenant or (having regard to the nature and location of the Premises and the normal means of access) are substantially inaccessible, then, until the Premises or the relevant part of them have been restored or made fit for the occupation and use of the Tenant or are accessible (as appropriate), the Rent or a proportionate part of the Rent according to the nature of the damage sustained abates'. The abatement provision only applies where the damage has not been caused in whole or in part by the act, neglect or default by the Tenant (clause 5.1).
16 By clause 14.1 of the Lease, subject to the Landlord's rights and whilst the Tenant complies with its obligations under the Lease, the Tenant is entitled to occupy the Premises without interference by the Landlord ('the Quiet Enjoyment Term').
17 By clause 14.2 of the Lease, the Landlord is obliged to keep the Premises structurally sound and maintain them in good structural repair and condition having regard to their condition at the commencing date of the Lease, fair wear and tear excepted, and save where it is the responsibility of the Tenant ('the Keep and Maintain Term').
18 By clause 13(c) of the Lease, the Tenants acknowledge and agree that subject to paragraph (d),[2] the Landlord is exempted from any liability to the Tenants for financial loss or inconvenience including for damages, abatement of rent or for repudiation and the Tenant is not entitled to terminate the Lease, seek compensation or damages or stop or reduce payments under the Lease because any of the services supplying the Premises fail or is outlawed or is not functioning at the Property at all or any such services are temporarily stopped or interrupted pending inspection, repair, maintenance or replacement or any Landlord's property breaks down or a structural repair has not been carried out.
19 Clause 16.1(a) of the Lease provides that the Tenant shall be in default if any rent or outgoings are unpaid and in arrears for seven days after becoming due, whether or not a formal demand has been made.
20 By clause 16.2 of the Lease, the Landlord is entitled in the event of default (and subject to the giving of such notice as is required by law) to re-enter and take possession of the Premises or any part (by force if necessary) and eject the Tenant, and by notice to the Tenant terminate the Lease as a result of which the Lease would be at an end ('the Re-entry Term').
21 In about September 2021, the Tenants fell into default in relation to payment of rent. By February 2022, the Tenants were in default of rent and outgoings in the amount of $504,317.51 (incl. GST and interest) and on 8 February 2022 the Landlord issued the Tenants with a notice pursuant to s 146 of the PLA ('the February Default Notice') claiming unpaid rental and outgoings of $504,315.90, which covered rental and outgoings said to be outstanding from 1 September 2021.
22 On 9 February 2022, the Landlord's Mr Collins met with the Tenants' Andrew Vincent at the Premises. Andrew Vincent explained that the Tenants was undertaking a financial restructure which would enable them to pay the outstanding rental and agreed to pay rental in the sum of $151,137.26 by 11 February 2022.
23 By letter dated 16 March 2022, the Tenants wrote to the Landlord requesting a 15% waiver of rental or 15% deferral of rental for a six month period on the basis of financial hardship due to the COVID-19 pandemic ('the 16 March 2022 Letter'). The Tenants advised that their cash flow was poor, that they had lost major clients due to client staff shortages brought about by disruptions caused by the pandemic, and that the company was 'down 30% in absent of storage warehouse workers and drivers, which has put undue pressure on operating the business' (sic).
24 On 18 March 2022, the Landlord sent a further notice pursuant to s 146 of the PLA ('the March Default Notice') claiming unpaid rental and outgoings of $357,095.68.
25 On 27 April 2022, the Landlord served a notice of re-entry and termination on the Tenants as a consequence of the Tenants' failure to remedy defaults set out the February Default Notice and the March Default Notice ('the 27 April 2022 re-entry notice').
26 The Tenants and the Landlord subsequently resolved the issues arising from the February Default Notice, the March Default Notice and the 27 April 2022 re-entry notice, and the Tenants remained in occupation pursuant to the Lease.
27 On 21 May 2022, Glenton Plumbing undertook an inspection of the roof of the Premises at the request of the Tenants and provided a report ('the Glenton Plumbing Report'). The Glenton Plumbing Report relevantly noted:
...
- Sandwich panel Stich joint - the join in the 2 panels shows signs of rust and deterioration. On the lower section of the roof there has been attempted to seal over the stich joint of the sandwich panel but has deteriorated in some parts.
On the upper section roof there is no attempts and there are clean signs the joint is leaking in some spots and holding water underneath.
28 The Glenton Plumbing Report was provided to the Landlord. The Landlord had in the meantime arranged for Gallant Plumbing to attend the Premises on 17 May 2022. Gallant Plumbing also attended at the Premises to conduct works on the Premises on four further occasions between 17 May 2022 and 1 July 2022.
29 It would appear that the Landlord sent a further notice to the Tenants pursuant to s 146 of the PLA on 27 May 2022 ('the May Default Notice').
30 On 7 June 2022, the Tenants' then solicitors, Rigby Cooke, asserted via letter that the May Default Notice was defective and did not provide full, accurate and adequate particulars of the alleged breaches ('the Rigby Cooke Letter'). The letter otherwise responded to various alleged breaches by the Tenants of clauses 6.2, 7.2(a)(i) and 13(g) of the Lease.
31 Relevantly, the Rigby Cooke Letter referenced, inter alia, the alleged failure on the part of the Landlord to address persistent refrigeration system problems experienced by the Tenants for around the past 18 months and the leaking roof of the premises as detailed in the Glenton Plumbing Report. Such matters were raised in response to a complaint by the Landlord that the Tenants had failed to follow certain guidelines provided in a letter from the Landlord to the Tenants dated 20 January 2022 entitled 'Cold Storage Facility Good Practice Guidelines and General Observations'.
32 The Rigby Cooke Letter stated that the water logging issue would not be resolved unless the Landlord immediately addressed the persistent refrigeration system problems and the leaking roof.
33 The letter further asserted that many of the complaints that the Landlord had raised about damage to the Premises had arisen due to the water logging issue to which the Landlord had contributed by failing to address the issues raised in, inter alia, the Glenton Plumbing Report. The letter asserted that such a failure constituted a breach by the Landlord of clauses 13(d), 14(c) and 29.1(b) of the Lease. The Rigby Cooke Letter observed that the most sensible way forward to resolve the issues and to clarify operational matters was through dialogue between the clients onsite at the Premises rather than through lawyers or statutory notices.
34 On 29 July 2022, MST Lawyers (who had commenced acting for the Tenants in place of Rigby Cooke) emailed the then-solicitors for the Landlord, HWL Ebsworth, acknowledging receipt of a further default notice dated 15 July 2022 ('the July Default Notice') which related to the outstanding rental and outgoings for July 2022. MST requested a two week extension on the due date for payment on the basis that the Tenants were presently at an advanced stage of refinancing and once those refinancing arrangements were in place they would be in a position to repay the moneys owing.
35 On 12 August 2022, Johnson Winter Slattery ('JWS'), solicitors for the Landlord, served statutory demands on the Tenants[3] in respect of a debt totalling $361,877.46 (inclusive of GST). The supporting affidavit sworn by Mr Collins, inter alia, referred to breaches by the Tenants of the rental and outgoings obligations under the Lease.
36 On 6 September 2022, the Tenants commenced the statutory demand proceeding in this Court seeking to set aside the statutory demand. The Tenants filed the Vincent affidavit in support of that application. Kingston Lawyers now acted for the Tenants in lieu of MST.
37 In the Vincent Affidavit, Andrew Vincent deposed as to a genuine dispute as to a number of the invoices (invoices numbered 042880, 043028, 046760, 049987 and 050060) totalling $59,145.60 on the basis that those invoices related to costs of a capital structure expenditure which are the responsibility of the Landlord under the Lease, and in the case of invoice 049060 in the sum of $913.20 which related to legal costs of the Landlord.
38 In addition, the Vincent affidavit referred to an offsetting claim reliant on the abatement provision in the Lease contained in clause 5.2. Relevantly, Andrew Vincent deposed as follows:
39 According to Mr Collins, this was the first occasion on which the Landlord became aware of any claim by the Tenants for abatement.
40 At the first return of the statutory demand proceeding, the Court made orders for the filing and service of affidavits and outlines of submission and fixed the application to set aside the statutory demand for hearing on 9 November 2022.
41 On 29 September 2022, JWS wrote to Kingston Lawyers noting, inter alia, that at the directions hearing, the Associate Justice had indicated that Vincent Transport is the subject of a separate winding up proceeding application. JWS further advised that it had attended a directions hearing in respect of that winding up proceeding (S ECI 2022 02541) on 28 September 2022 ('the winding up proceeding'), and that it was apparent that Vincent Transport had a significant number of unpaid creditors with an interest in the winding up.
42 JWS advised that in those circumstances, the Landlord did not propose to 'agitate its rights in respect of the debts or the statutory demands' in respect of the statutory demand proceeding, but rather would remain a 'party to the winding up proceeding'.[4] Accordingly, JWS proposed that orders be made in the statutory demand proceeding dismissing the proceeding with no order as to costs and that in such event, the Landlord would withdraw reliance on the statutory demand. This proposal was not accepted by the Tenants.
43 As noted above, on 10 October 2022, the Landlord served the October Default Notice asserting outstanding rental and outgoings in the amount of $736,947.11 (including GST), covering the period from 1 July 2022 to 31 October 2022.
44 Further, as noted above, on 27 October 2022, the Landlord served the Termination and Re-entry Notice, and purported to bring the Lease to an end.
45 The Tenants' application seeks alternative relief. The question of relief against forfeiture only arises if the Tenants' application for an interlocutory injunction is unsuccessful.
46 It is accordingly convenient to deal first with the application for an interlocutory injunction.
47 There was no dispute between the parties as to the principles to be applied. In order for the Tenants to obtain an interlocutory injunction they must establish that:
(a) there is a prima facie case - in the sense that the Tenants must show a sufficient likelihood of success in the proceeding to justify in the circumstances the preservation of the status quo pending trial;[5]
(b) secondly, that the balance of convenience favours the grant of an injunction, that is if relief were refused, they would suffer a greater injury than the Landlord would suffer if the injunction were granted.[6]
48 Both parties accepted that the two elements are not to be considered in isolation. As Almond J stated in Sudjalim Pty Ltd v Homle Pty Ltd:[7]
It is common ground that on an application for an interlocutory injunction, the Court will need to determine whether there is a serious question to be tried as to the plaintiffs' entitlement to relief; whether the balance of convenience favours the granting of an injunction, including whether the plaintiffs are likely to suffer an injury for which damages will not be an adequate remedy; and whether there are any discretionary considerations which weigh for, or against, the grant of relief. These questions must be examined together. An apparently strong claim may lead a court more readily to grant an injunction where the balance of convenience is fairly even. A more doubtful claim, which nevertheless raises a serious question to be tried, may still attract interlocutory relief if there is a marked balance of convenience in favour of it.
49 I shall apply those principles in the resolution of the application for injunctive relief.
50 The principal argument at the hearing concerned whether the Tenants had established a prima facie case with respect to their claim for rent abatement pursuant to clause 5.2(a) of the Lease. The Tenants relied upon the Glenton Plumbing report as well the affidavits of Andrew Vincent, Mr Shannon, Mr Smith and the oral evidence from Craig Vincent. In addition, the Tenants played two videos which were referenced respectively in Mr Shannon's second affidavit and in the affidavit of the accountant, Mr Smith. The first video showed a significant quantity of water on the floor of the Premises, whilst the video referred to in Mr Smith's affidavit showed an employee with a large broom sweeping out significant amounts of water through the loading dock at the Premises.
51 The Glenton Plumbing report contains various observations as to gaps in apron flashing and capping as well as issues relating to the downpipe spreader which, in the author's view, 'would lead to water penetration', or alternatively 'on a windy day would allow rainwater to enter' and which 'may also contribute to a roof leak due to water being discharged directly onto the apron flashing'.
52 In the Vincent affidavit, Mr Vincent deposed to the fact that 'due to inter alia the leaking roof an area representing 24% of the leased area has been substantially unfit for use since January 2021' and that an additional 11% has been substantially unfit for use due to malfunctioning chiller plants. At the hearing, counsel for the Tenants stated that the chiller plant issue had now been fixed. Accordingly, that component can be put to one side. In Mr Shannon's second affidavit, he deposed that he had been instructed that '30% of the floor space at the premises is not useable at all whilst a further 20-30% including the loading dock is not fit for purpose'. The video played in Court embedded in Mr Shannon's second affidavit apparently was taken shortly after a significant rainfall event which occurred on or about 11 November 2022.
53 Craig Vincent's oral evidence was that 40-50% of the Premises was unusable, in particular chiller rooms 3 and 5.
54 The Landlord relied on a report from Gallant Plumbing dated 24 November 2022 ('the Gallant Plumbing Report') which stated that Gallant Plumbing had tested the roof for leaks on 17 November 2022 and found no ingress of water from the roof.
55 The Landlord also relied on a report from Liquid Ice Refrigeration Pty Ltd dated 3 March 2022 which concluded the water on the loading dock floor and large fluctuations in room temperatures at the Premises occurred as a direct result of the suboptimal operational use of the facility by the Tenant (the 'Liquid Ice report'). The Landlord submitted that on the basis of the report, the Tenants were at least partly to blame for any damage sustained to the Premises.
56 The Landlord also relied on numerous photos of the Premises taken on 21 March 2022, 19 May 2022, 9 June 2022, 15 July 2022, 25 August 2022, and 7 September 2022, all of which show the Premises in use including chiller rooms 3 and 5, and evidence from Mr Stanfield, the Landlord's senior facilities manager who deposed to his attendance at the Premises on some 40 occasions between 18 February 2022 and 17 November 2022 for the purpose of inspecting its condition. Mr Stanfield had taken the photos relied on by the Landlord.
57 Among other things, Mr Stanfield deposed to the fact that, inter alia, no representative of the Tenants had conveyed to him during any of his inspections that the Premises were not useable at all or other parts of the Premises were not fit for purpose.
58 He further deposed that during the course of his inspections of the Premises he did not observe that the Tenants were avoiding any areas of the Premises, and that he first became aware of the Tenants' claim for abatement when he saw the Tenants' affidavits relied upon for the purposes of this application.
59 Mr Stanfield otherwise deposed to his attendance at the Premises on 22 November 2022 following complaints by the Tenants of water on the floor of the Premises following heavy rains over the weekend of 19 and 20 November 2022. Mr Stanfield deposed that the apparent source of the moisture on the floor of the Premises to which his attention was directed was most commonly located along the transition zone side of the wall between the transition zone and the chiller and freezer rooms and that the source of the water appeared to be drips from the evaporators.
60 When the photos of chiller rooms 3 and 5 were shown to Craig Vincent in cross-examination, Craig Vincent said that those photos were taken some time ago and, in any event, maintained that chiller rooms 3 and 5 could not be used. He explained that the stored product shown in the photos in chiller rooms 3 and 5 was effectively stuck there as it was not possible to access those areas and remove the product due to the condition of the Premises.
61 Craig Vincent gave oral evidence to the effect that he provided all of the information contained in Mr Shannon's affidavits.
62 Clearly, Mr Shannon's evidence is of no weight. Mr Shannon only commenced acting for the Tenants at some stage after 29 July 2022.[8] Insofar then as Mr Shannon records his instructions that 30% of the floorspace of the Premises is not useable at all, whilst a further 20-30% including loading dock is not fit for purpose, the weight depends upon an evidentiary basis establishing the matters the subject of the instructions. Absent such an evidentiary basis, Mr Shannon's evidence serves no purpose. Further, on its most logical reading, Mr Shannon is referring only to the useability or otherwise of the Premises as at the date of the swearing of his second affidavit on 18 November 2022, not the useability during the period where the rental and outgoings referred to in the October Default Notice was unpaid (1 July 2022 to 31 October 2022). The Vincent affidavit which references 24% of the Premises being substantially unfit for use since January 2021, and Craig Vincent's oral evidence to the effect that 40-50% of the Premises cannot be used, does not suffer from this particular vice.
63 Whilst I accept that this is only an interlocutory application and that it is generally inappropriate to resolve contested questions of fact, the Court's role is to look at the whole of the evidence adduced on the application and then assess whether in light of that evidence the Tenants have shown a sufficient likelihood of success to justify the relief sought.[9] When the whole of the evidence is considered, the content of the Vincent affidavit and Craig Vincent's oral evidence warrants close scrutiny.
64 First, Andrew Vincent's evidence that 24% of the Premises has been substantially unfit for use since January 2021 sits uneasily, to say the least, with a significant body of contemporaneous documentary evidence, much of which emanates from the Tenants. First, and importantly, there was no assertion to that effect made by the Tenants in the 16 March 2022 Letter.[10] Secondly, it is at odds with the resolution between the Tenants and the Landlord of the defaults identified by the Landlord in the February Default Notice and the March Default Notice and the 27 April 2022 re-entry notice. Thirdly, the inability to use the Premises was not asserted by Rigby Cooke in the Rigby Cooke Letter notwithstanding in that same letter, Rigby Cooke asserted, on the Tenants' behalf, breaches by the Landlord of various provisions of the Lease including the Keep and Maintain Term. Fourthly, it is starkly at odds with the communication from MST of 29 July 2022.[11] Fifthly, it is also irreconcilable with the detailed observation conducted in Mr Stanfield's affidavit and the photos which he had taken of all areas of the Premises which showed the Premises in use. Mr Stanfield's account condescends to specific dates and numerous photos and his affidavit was filed a little under two weeks prior to the hearing and was not the subject of any responsive affidavit from the Tenants. Sixthly, Craig Vincent's evidence that product was trapped in chiller rooms 3 and 5 on its face begs further questioning; even if that is correct, presumably storage fees are being paid. If they are not, one would expect to see some evidence of complaint by the owners of the goods as to their inability to retrieve them.
65 Further, the evidence of Andrew Vincent and Craig Vincent is inconsistent as to the percentage of the Premises unable to be used and in both cases is completely devoid of any of the particularity that would ordinarily be expected in relation to assertions of the kind made. The Vincent affidavit did not identify those parts of the Premises which were unusable. Although Craig Vincent's oral evidence that the relevant area concerned related to chiller rooms 3 and 5, there was no attempt in the evidence to condescend to identifying how the particular percentages were calculated, and in the case of Craig Vincent's evidence, what period of time he is referring to. Nor was there any attempt to link the potential areas of water ingress identified in the Glenton Plumbing report to the locations of the water shown in the videos much less chiller rooms 3 and 5, nor the relevant percentage of the leased area of the Premises said to be unable to be used.
66 Notwithstanding the evidentiary bar applicable in applications of this nature, and the undesirability of seeking to resolve contested evidence, the evidence on this application relied upon by the Tenants is so broad lacking in specificity and at odds with the inferences available from objective facts disclosed by communications by or on behalf of the Tenants that the Tenants fall short of establishing a significant likelihood of success in the proceeding in respect of its claim for abatement to justify the relief they seek.
67 For completion, I am not prepared to make any findings on the hearing of this application that any damage that occurred was caused in whole or in part by the act, neglect or default of the Tenants. Notwithstanding that there are suggestions to the effect in the Liquid Ice report, Craig Vincent denied that this was so and in any event without more the Liquid Ice report can only relate to the conditions as at the date of the report. Given the nature of this aspect of the factual dispute it is neither appropriate nor possible to resolve these questions at this time.
68 However, the Tenants' claim for injunctive relief faces a more substantial impediment. The most favourable interpretation of the evidence from the Tenants' perspective, is that 50% of the Premises has been unusable since January 2021.[12] This means that during the period the subject of the October Default Notice (which covered 1 July 2022 to 31 October 2022), the Tenants were able to use 50% of the area of the Premises. Any rent abatement for that period could not exceed 50% of the rental payable. Further, the abatement entitlement only arises in connection with the payment of rental, not outgoings.
69 As such, on the view of the evidence most favourable to the Tenants, the Tenants are liable to pay outgoings during the period 1 July 2022 to 31 October 2022 and 50% of the rental.
70 This notwithstanding, the Tenants failed to pay any rental or any outgoings for the period the subject of the October Default Notice.
71 As such when the Landlord served the Termination and Re-entry Notice on 27 October 2022 and purported to bring the Lease to an end, the Tenants were in default within the meaning of clause 16.1(a) of the Lease.
72 Accordingly, provided the Landlord gave such prior notice as was required by law, it was entitled to terminate the Lease, and re-enter and take possession of the Premises.
73 There is no question this is what the Landlord sought to do by reason of its service of the Termination and Re-entry Notice. Further, the attempting to evict the Tenants from the Premises is also consistent with a forfeiture by the Landlord of the Lease. The Landlord has therefore both re-entered the Premises pursuant to a provision for re-entry in the Lease and by its physical attempts to take possession, effected a forfeiture of the Tenants interest under the Lease.[13]
74 Provided then that the Landlord gave all notices required by law by reason of the service of the Termination and Re-Entry Notice and the attempt to take possession and bring the lease to an end, the Landlord has terminated the Lease and thereby effected a forfeiture of the Tenants' interest in the Premises as lessee. That conclusion still follows even if the Tenants were entitled to an abatement of 50% of the rental for the period from 1 July 2022 to 31 October 2022.
75 In oral argument and in their written outline, the Tenants submitted that an overstatement of the amounts said to be owing in the October Default Notice renders the notice invalid because the amount of rent claimed to be owing was not due and owing. The Tenants therefore argued that because were entitled to an abatement of 50%, the October Default Notice was invalid because it claimed the full amount of the rent and outgoings when only 50% of the rent and outgoings were payable. This would be a surprising outcome, as it would invalidate a notice if the amount claimed was overstated, even by a small amount, or if some but not all defaults alleged were made out.
76 The Tenants relied upon Whild v GE Mortgage Solutions Ltd ('Whild').[14] Whild involved the exercise by a mortgagee of power of sale. Among the issues in the case was the validity of a notice to pay given by the mortgagee pursuant to s 76 of the Transfer of Land Act 1958 (Vic) ('the TLA').
77 Whild is of no assistance to the Tenants. The notices under consideration in Whild were invalid not because they overstated the default but rather because they specified a default which had not in fact arisen. In fact, the case made clear that a notice was not invalid merely because it overstated the amount owed.[15]
78 Further, and specifically in the case of notices required to be given pursuant to s 146 of the PLA, it is instructive to consider Primary RE Limited v Great Southern Property Holdings Ltd (Receivers and Managers appointed) (in liq) & Ors ('Primary RE Ltd)[16] where Judd J undertook a detailed analysis as to the validity of notices served under various statutory provisions including s 146 of the PLA.
79 Primary RE Ltd involved a breach otherwise than in respect of the payment of money. This notwithstanding, the recipient of the notice alleged that the notice was defective in that it failed to specify the relevant amount of compensation.
80 His Honour rejected that argument but in doing so referred to a number of cases which considered the necessary elements required for compliant notices. Relevantly, among others, his Honour referred with approval to the judgment of Hodgson JA in Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service ('Macquarie'), where Hodgson JA stated: [17]
A s 129 notice is not invalidated if the lessor includes in it specification of breaches that a court later finds were not committed. In my opinion, it would follow from this that an otherwise valid s 129 notice is not invalidated just because the lessor requires the lessee to remedy a breach that has not in fact occurred, or to pay an amount in compensation that is more than what is reasonable. In such cases, if the lessee does not wish to comply with requirements in the notice to the extent that the lessee considers them excessive, the lessee may take the risk of not complying fully with the lessor's requirements; and if the lessor then purports to forfeit the lease and the matter comes to litigation, the lessee may or may not be successful. But in such a case, at least the lessee is given information as to what the lessor requires and can be confident that if these things are done there will be no forfeiture. The notices in this case did not perform that function.
(citations omitted)
81 Similarly, his Honour also referred with approval to the judgment of Lord Russell CJ in Horsey Estate Ltd v Steiger[18] where the Lord Russell CJ:
The object seems to be to require in the defined cases (1.) that a notice shall precede any proceeding to enforce a forfeiture, (2.) that the notice shall be such as to give the tenant precise information of what is alleged against him and what is demanded from him, and (3.) that a reasonable time shall after notice be allowed the tenant to act before an action is brought. The reason is clear: he ought to have the opportunity of considering whether he can admit the breach alleged; whether it is capable of remedy; whether he ought to offer any, and, if so, what, compensation; and, finally, if the case is one for relief, whether he ought or ought not promptly to apply for such relief. In short, the notice is intended to give to the person whose interest it is sought to forfeit the opportunity of considering his position before an action is brought against him.
82 Although the notices in those cases involved breaches in respect of which an obligation arose to pay compensation, they have application by analogy in the present circumstances.
83 The October Default Notice sufficiently made clear to the Tenants what it was that the Landlord required to be remedied, failing which the Landlord would exercise its right to re-enter. The Tenants could be confident that if they remedied the matters specified in the October Default Notice, there would be no forfeiture.[19] The Tenants were therefore given the opportunity of considering whether they should admit the breach and remedy it or undertake any lesser remedial step. The Tenants could have chosen to pay the outgoings and half the rental prior to the expiry of the period referred to in the October Default Notice and then argued that there was no default because the effect of the abatement provision was such as to reduce the rent by 50%.
84 In the present case, the Tenants considered the breach and resolved to pay nothing, even where they have never asserted that they were not obliged to pay the outgoings.
On any view of things therefore, as at the date of the service of the Termination and Re-entry Notice the Tenants were in default of the Lease within the meaning of clause 16.1 of the Lease. Accordingly, unless the October 2022 Default Notice was invalid, the Landlord was entitled to give notice terminating the Lease and re-entering and taking possession of the Premises including by force, which it did by the service of the Termination and Re-entry Notice. In doing so, it effected a forfeiture of the Tenants' interest under the Lease.
85 Even if I were to accept that the evidence is such as to give rise to a prima facie case for abatement of rent for 50% for the period July 2022 to 31 October 2022 the Tenants were still in breach and as such have no answer to the termination of the Lease and forfeiture of the Tenant's interest under the Lease which occurred on 27 October 2022.
86 It follows therefore that the Tenants have not established a prima facie case to the effect that the Landlord was not entitled to and did not re-enter the Premises on 27 October 2022.
87 For completion, I will briefly address three ancillary aspects of the Tenants' submissions with respect to the prima facie case. First, insofar as the Tenants rely upon an abatement entitlement for the period from 1 January 2021 to 30 June 2022 (being for the period prior to that period relevant to the October Default Notice), I consider that they have not established a prima facie case. An entitlement to abatement is prospective, not retrospective. It is not open to a party seeking an abatement of rental to pay the rent but after payment has been made to assert an entitlement to abatement.[20]
88 To the extent to which the Tenants rely upon the assertion that rental payments over that period have been made under protest, I do not accept that there is sufficient evidentiary basis on the current material to accept that any abatement entitlement arises. The apparent source of the proposition that rent was paid under protest is provided in paragraph 12 of Mr Shannon's first affidavit where Mr Shannon deposed that 'the rent was paid under protest as the Tenants' position was that the first purported default notice was invalid'. This paragraph was rightly objected to by the Landlord on the basis that it is inadmissible even allowing for the fact that evidence on an interlocutory application can be based on information and belief where the grounds of such information and belief are stated.[21] Mr Shannon did not depose in his affidavit to the source of that information and belief which enabled him to depose to that matter.
89 Mr Shannon of course was not the solicitor for the Tenants at the time at which that payment of rent. His the assertion is contrary to Mr Stanfield's evidence,[22] and more pertinently, it is contrary to email exchanges by and on behalf of the Tenants and Mr Collins in the period from March to May 2022; including the Rigby Cooke Letter of 7 June 2022 and the MST Lawyers letter of 29 July 2022.
90 Further, and even if I was to accept that Mr Shannon's evidence is rendered admissible by Craig Vincent's oral evidence to the effect that everything in Mr Shannon's affidavit was based upon information provided by him, Mr Shannon's evidence only establishes that the rent the subject of the March Default Notice was paid under protest.
91 Mr Shannon's evidence does not relate to rent paid prior to that time and, in any event, is irrelevant because it provides no answer to the default arising by reason of the failure to pay the outgoings the subject of the October Default Notice.
92 Secondly, and insofar as the Tenants rely upon an alleged breach of the Quiet Enjoyment Term and the Keep and Maintain Term based upon the leaks which have occurred at the Premises from time to time, I am prepared to assume in the Tenants' favour for the purposes of this application that in respect of those days where such leaks occurred it is arguable that breaches of those covenants may have been enlivened. In such event, however, at its highest, the Tenants may have a claim for unliquidated damages.[23] Such an entitlement to unliquidated damages is no answer to the Landlord's termination of the Lease and re-entry of the Premises on 27 October 2022 including because the obligation to pay rent and other charges imposed by clause 3.1 of the Lease which was the actionable default which gave rise to the re-entry is required to be made 'free of any deductions, counterclaims or set-off' (whether arising at law or in equity). It may also give rise to an abatement with respect to rental payable on those days for the area affected, provided rent has not been paid for those periods, but any such entitlement is not an answer to the re-entry for the reasons earlier stated.
93 Further, insofar as the Tenants rely upon Mr Smith's evidence to the effect that the decline in turnover of the first plaintiff's business (of circa $2.8 million), and that of the second plaintiff's business (of circa $1.9 million) in the period July to October 2022 is 'directly attributable to the state and presentation of the premises and the fact that the tenants cannot use 100% of the lettable area of the premises', I accept the Landlord's objection to the evidence on the basis that, inter alia, the basis of Mr Smith's opinion is not set out in paragraph 9 of his affidavit. Further, and in any event, expressed as it is I would accord such evidence no weight. Additionally, such evidence is in direct contradiction to the 16 March 2022 Letter.[24]
94 Given my conclusion that the Tenants have not established a prima facie case in respect of their claim for interlocutory injunctive relief, it is not necessary for me to consider the balance of convenience, nor related matters.
95 However, given that the matters were addressed by the parties in their submissions and in case I am wrong with respect to my conclusions concerning the prima facie case, I will deal with them, albeit more briefly than might otherwise be the case.
96 Ordinarily, in a case such as the present where the denial of relief will deprive the Tenants of occupancy of the Premises and in practical terms result in the cessation of business the balance of convenience will favour the Tenants. Although the Tenants would be entitled to damages for the loss sustained by reason of any wrongful re-entry, such damages would ordinarily not be an adequate remedy.
97 However, as both parties accepted, in considering where the balance of convenience lies, a court may consider the apparent strength of the plaintiff's claim (even if it is considered a prima facie case) and the utility of the proposed injunction.
98 Consideration of the balance of convenience also requires regard to be had to the adequacy or otherwise of the undertaking as to damages offered by the party seeking injunctive relief.
99 As Gibbs J stated in Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd,[25] the giving of an undertaking is a very important if not essential means of preventing injustice from being done by the court when it makes an order at an interlocutory stage before the rights of the parties have been finally determined.
100 In that respect, the resources of the party offering the injunction must be sufficient and available to meet any damages awarded as a result or security may be required.[26]
101 In the present case, the Tenants have offered an undertaking as to damages. Further, they have undertaken to pay outgoings under the Lease as and when they fall due.
102 The application is accompanied by a further undertaking to the effect that they would pay $61,771.90 (including GST) on the first day of each calendar month in accordance with the Lease which sum represents one-half of the rent due under the Lease. The Tenants submit that an undertaking in those terms is 'entirely fair', given the existence of the rental abatement clause and the Tenants' downturn in trading allegedly as a direct consequence of the Landlord's breaches of the Lease.
103 Further, the Tenants assert that by reason of the matters stated in the 'Other Matters' section of the orders made by the Court on 9 November 2022, they have brought all outstanding rent and outgoings up to date.
104 It is convenient to deal with this last point first.
105 By undertaking recorded in paragraph A(i) of the 'Other Matters' section in the 9 November 2022 Orders, the Tenants, inter alia, undertook to pay the sum of $136,827.70 for outstanding outgoings within 14 days of the order being authenticated.
106 In fact, the Tenants did not comply with that undertaking. The order was authenticated on 9 November 2022. However, the cheque for the outgoings was not received until 25 November 2022 and did not clear for payment until 28 November 2022.
107 More pertinently, the Tenants also undertook to pay rent in the sum of $61,771.90 (incl GST, being half rent due under the Lease) on the first day of each calendar month in accordance with the Lease.
108 Accordingly, by the time the matter came on for further hearing on 6 December 2022, compliance with the undertaking required a payment of $61,771.90. The payment had not been made. The Tenants were in breach of the undertaking. The Landlord submitted that this alone justified the dismissal of the application.
109 In fact, it would appear that the Tenants took the approach that they were not required to make payment of the $61,771.90 because they had not received an invoice for that amount. The Landlord, taking the view that rental was payable in the full amount in accordance with the provisions of the Lease, had rendered an invoice for the total amount of the rent.
110 Of course, it was open to the Tenants to have part paid the invoice as to $61,771.90. Such a step would have been in conformity with the undertaking. The Landlord was not required to send an invoice for half the amount, nor did any failure on its behalf to do so excuse the Tenants from the obligation to make payment as they had undertaken to do so.
111 In any event, I was informed by counsel for the Tenants in the course of the hearing that the Tenants had made payment of the $61,771.90 during the course of the hearing. Of course, this was not the subject of evidence and after the hearing had concluded, the Landlord filed a further affidavit which stated that the cheque had not cleared.
112 The more significant question raised by this aspect of the Tenants' submission concerns the matter recorded in paragraph B of 'Other Matters'.[27] By that paragraph, the Tenants proffered their consent to the Landlord drawing on the amount of $794,390.52 which was said to be part of the 'Additional Incentive amount' referred to in item 16 of the Lease to pay ' the outstanding rent in the sum of $633,110.40, which was said to be the outstanding rent up to and including 31 October 2022'. Putting to one side that this consent is contrary to the Tenants' assertion as to an entitlement to abatement, the Tenants submit that this concession means that the Tenants have brought all outstanding rent and outgoings up to date (including those that are referred to in the October Default Notice).
113 It does not. First, paragraph C of 'Other Matters' confirms that the Landlord did not accept that it was holding the Additional Incentive amount as security under the Lease and reserved all its rights in connection with the subject matter of the proceeding and the Lease. Further, the Landlord confirmed on 6 December 2022 that it had not drawn on that amount to pay the outstanding of $633,110.40 which was the outstanding rent up to and including 31 October 2022.
114 The Additional Incentive is identified in item 16 of the schedule to the Lease and is the subject of clause 28.5 of the Lease. The Additional Incentive specified in item 16 is $800,000 plus GST, not $794,390.52 (inclusive of GST) referred to in paragraph B of 'Other Matters'. Further, clause 28.5 of the Lease reads:
28.5 Additional Incentive
(a) The Tenant will be entitled to the Additional Incentive if it satisfies either the following:
(i) the Tenant elects to provide the Bank Guarantee in accordance with clause 19.1 during the Term and is otherwise compliant with all of its obligations under the Lease at the time the Tenant provides the Bank Guarantee; or
(ii) at the expiry of the Lease, the Tenant:
did not provide the Bank Guarantee during the Term;
has not exercised the option to renew the Lease in accordance with clause 20;
has satisfied all of the Tenant's obligations under the Lease, including the obligation under clause 12; and
is not in dispute with the Landlord in relation to any alleged material or monetary breaches of the Lease, including the Tenant remaining solvent.
(b) If the Tenant is entitled to the Additional Incentive pursuant to clause 28.5(b), the Landlord agrees to pay the Additional Incentive to the Tenant within 30 days of the Tenant providing a valid tax invoice for the Additional Incentive. The Tenant cannot claim the Additional Incentive more than once during the Term.
115 Evidently, the Tenants have not provided the Bank Guarantee in the amount of $794,390.52 at the commencement date. They were not obliged but had the option of doing so. If they did, they were entitled to the Additional Incentive. As such, clause 28.5(a)(i) has no application. It also follows that the Landlord is not holding any security (aside from the personal guarantee provided by Andrew Vincent) with respect to the Tenants' obligations under the Lease.
116 Clause 28.5(a)(ii) entitles the Tenants to the Additional Incentive at the expiry of the Lease provided the events referred to in paragraph B, C and D have or have not arisen as the case may be.
117 In other words, the Additional Incentive is not the Tenants' money held by the Landlord as security for the performance of the Tenants' obligations under the Lease but rather represents an amount payable by the Landlord to the Tenants at the expiry of the Lease in certain circumstances. Understood in this way, the consent referred to by the Tenants and recorded in paragraph B of the orders of 9 November 2022 amounts to nothing more than an offer by the Tenants to relinquish their ability to call upon the Landlord to pay to them the amount of the Additional Incentive at the expiry of the Lease. The Landlord has not accepted the offer and as such the matter adverted to in paragraph B of Other Matters is of no consequence.
118 Importantly, as a result, the Tenants have not paid to the Landlord the rent of $633,110.40 being the rent specified in the Lease up to and including 31 October 2022. Nor have they paid half the rent specified as due on 1 November 2022 and the half specified as due on 1 December 2022. Further, by the Tenants' undertaking to only pay 50% of the rent that falls due in the period from the making of interlocutory orders, the amount potentially falling due under the Lease in the period from the date of any order until the date of judgment in the proceeding will increase at the rate of $61,771.90 per month.
119 The potential consequence therefore if the Tenants fail in their action is that at its conclusion they will be indebted to the Landlord for a very considerable amount which may be called upon under the undertaking as to damages.
120 In that context, the strength of any prima facie case advanced by the Tenants and the question of the adequacy or otherwise of the Tenants' undertaking as to damages assumes considerable significance. First, as noted above, I do not accept that the Tenants have established a prima facie case. If they have, it is very much at the weaker end.
121 Relevant also is the strained financial circumstances in which the Tenants find themselves. The Tenants are the subject of an extant application for winding up. As Craig Vincent confirmed in cross-examination, there were initially six creditors, including the petitioning creditor, who supported the making of a winding up order. He said that repayment arrangements had been entered into with four, leaving two creditors supporting the extant winding up proceeding (excluding the Landlord).
122 Additionally, the entirety of the assets and undertaking of the Tenants are subject to fixed and floating charges in favour of Hermes Capital Australia Pty Ltd ('Hermes Capital') granted on 5 August 2022. Further, Hermes Capital also holds a registered first mortgage on the title of the residence of Andrew Vincent and his wife in Narre Warren.
123 The Tenants' assets are also subject to registered security interests in favour of Scottish Pacific Business Finance Pty Ltd and in the case of the first plaintiff, registered security interests in favour of Latitude Automotive Financial Services Pty Ltd, Toyota Finance Australia Limited and PACCAR Financial Pty Ltd.
124 It is tolerably clear therefore that the undertaking as to damages proffered by the plaintiffs is inadequate. This is a powerful discretionary factor against the grant of an interlocutory injunction.[28]
125 For the above reasons, the Tenants' claim for interlocutory injunctive relief is dismissed.
126 It therefore is necessary to consider the Tenants' alternative claim for relief against forfeiture.
127 The Tenants submit in the alternative that pursuant to s 146(2) of the PLA or the inherent jurisdiction of the Court, the Tenants should be granted relief against forfeiture.
Where a lessor is proceeding, by action or otherwise, to enforce or has enforced without the aid of the Court or the County Court such a right of re-entry or forfeiture, the lessee may apply to the Court for relief; and the Court may grant or refuse relief, as the Court, having regard to the proceedings and conduct of the parties under the foregoing provisions of this section, and to all the other circumstances thinks fit; and in case of relief may grant it on such terms (if any) as to costs, expenses, damages, compensation, penalty or otherwise, including the granting of an injunction to restrain any like breach in the future, as the Court, in the circumstances of each case, thinks fit.
129 The principles to be applied in respect of applications for relief against forfeiture were recently summarised by Forbes J in The Heat Group Pty Ltd v Paragon Care Ltd[29] as follows:
(a) The relief is equitable in nature granted in the discretion of the Court.
(b) The right of re-entry by a landlord for non-payment by a tenant is viewed as a security for payment of amounts owing by a tenant.
(c) Where a landlord has been put in the position that in the eyes of equity their right of entry is security for, then it will generally be unconscionable for a landlord to insist on the right to re-enter.
(d) Where forfeiture is for non-payment of rent and the Court is satisfied that the defaults for which the tenant is evicted have been made good, relief will generally be granted save in exceptional circumstances.
(e) Exceptional circumstances may include consistently lengthy defaults in the past which may fairly lead to an inference that even if relief be given there is a reasonable likelihood rent will not be paid in the future, at least for some considerable time, or where the tenant is insolvent.
(f) Uncertainty about future capacity to pay rent should be considered favourably to a tenant in granting relief, given that any uncertainty can be met by a landlord subsequently terminating the lease for any future breach.
(g) Relief is unlikely to be refused where the lease provides a guarantee or bond to cover the tenant's obligations.
(citations omitted)
130 I have also obtained considerable assistance in the present case from Jam Factory Pty Ltd v Sunny Paradise Pty Ltd, where Ormiston J stated:[30]
The tenant offered to pay the rent in arrears, and in those circumstances relief against forfeiture for non-payment of rent should be granted usually as of course, save in exceptional circumstances. This principle, with two variations, has been accepted for many years and is said to flow from the view that the right of re-entry for non-payment of rent is primarily a security for that rent ...
As to failure to pay rent, this is clearly not an exceptional case. Some idea of what that exception requires may be gained from a comment which appears in two of the authorities. Rigby LJ said in Newbolt v Bingham (citation omitted) that he knew of no case where a court of equity had refused relief because actions had to be brought on previous occasions to recover the rent: cf Gill v Lewis, at 11. Here it had not been necessary to bring an action for the rent in the past and there had been few complaints, for the latest payment, apart from the last two months, was three weeks beyond the due date. The power to refuse relief is clearly reserved for cases of consistently lengthy defaults which may fairly lead to an inference that, even if relief be given, there is a reasonable likelihood that the rent will not be paid in future, at least for some considerable time after the due date for payment.
The only way in which the landlord could deny the applicant relief in this case was by showing that it was or would soon become insolvent because its business was badly run. I concede that is a possibility on the evidence, but the material falls a long way short of satisfying me of either proposition. Of course, if the tenant continues to pay late and the lease has to be forfeited again, that may provide circumstances leading to an opposite conclusion in the future.
In the present case, the worst that can be said of the tenant was that its approach to its obligations to pay rent and outgoings was desultory. In many respects it does not deserve to be relieved against the forfeiture, but its acts did not display a deliberate denial of the landlord's rights, nor were the earlier breaches of that obligation of a kind which could place this case in the "exceptional" category. The proposal for payment of rent, together with the guarantee, provide at least some assurance against immediate repetition of the breach.
131 A substantial difficulty faced by the Tenants in their application for relief against forfeiture is that they have not paid the arrears.[31] Nor have they undertaken to pay the monthly rental specified in the Lease as it falls due. Rather, they have undertaken to only pay 50% on the basis that the 50% figure is 'entirely fair'. Secondly, they have not offered to pay the Landlord's costs of the proceeding to date on an indemnity basis which is ordinarily an incident of the exercise of the Court's discretion to grant leave against forfeiture.[32] Thirdly, this is a case where there have been consistently lengthy defaults and, including because of the Tenants' obvious strained financial circumstances, there must be a reasonable likelihood that the rent will not be paid in the future. Relatedly, there is a reasonable basis on the evidence to consider that the Tenants are or will become insolvent. These are all very powerful arguments against granting the Tenants relief against forfeiture.
132 Further, in the circumstances I have no hesitation in refusing against forfeiture on the conditions sought by the Tenants, which is they continue to comply with the undertakings which relevantly involve them only paying half the rent and which leave outstanding the $633,110.40 said to be the outstanding rent owing up to and including 31 October 2022.
133 In argument, counsel for the Tenants submitted that it was open to the Court to grant relief against forfeiture on whatever terms the Court saw fit and if that occurred, it would then effectively be open to the Tenants to meet those terms or not. If they did, the forfeiture of the Lease would be avoided; if they did not, their right to occupy the Premises would be lost. Effectively, the submission invited orders granting relief against forfeiture on the usual basis of remedying outstanding defaults, albeit that the Tenants' application was not made on that basis.
134 If the Tenants' application for relief against forfeiture was accompanied by an undertaking to pay the outstanding rent in the sum of $633,110.40 (being the outstanding rent owing up to and including 31 October 2022) together with an acceptance of its prima facie liability to pay the full amount of rent and outgoings due going forward, there would still be strong arguments against a grant of relief including because of the Tenants' actual or potential insolvency and the history of default.
135 However, as against that, I have considered that the balance of the term of the Lease is nearly two years, given that the expiry date of the lease is not until 30 November 2024, and relief against forfeiture is generally granted for non-payment of rent,[33] absent exceptional circumstances.
136 At the hearing the Landlord undertook that it would not seek to physically take possession of the Premises until 31 January 2023 even if the Tenants' application was dismissed (both for an injunction and relief against forfeiture) provided of course that the Tenants recognise an obligation to pay 'rent'[34] during that period.
137 Given that the Tenants will remain in possession in any event until 31 January 2023 and recognising that relief will ordinarily be granted in the case of non-payment of rent, I am disposed to grant the Tenants relief against forfeiture but on the strictest of terms such that the Tenants would be required by 30 January 2023 to remedy all outstanding defaults. The Lease does have two years to run, and the proviso for re-entry is properly regarded as security for the payment of rent. There is also some basis on the evidence to suggest that the Tenants have been trying to organise their affairs in such a way as to enter into agreed arrangements with their creditors albeit that their attempts with the Landlord may perhaps with hindsight have been unwise.
138 As such the Tenants will have to make payment in full of all outstanding rent owing as at 31 October 2022 ($633,110.40, including GST) together with the full amount of the rent specified in the Lease as due from 1 November 2022 to 1 January 2023 by no later than 30 January 2023. A like conclusion will be imposed with respect to outgoings (to the extent to which they are unpaid) save that the outgoings claimed are to be reduced by the amount of $49,000 in respect of the invoices rendered by Tritech in respect of which the Landlord conceded there was an issue.
139 If the Tenants make that payment by that date, the Tenants will be relieved of the forfeiture of the Lease which occurred on 27 October 2022. If they do not, the Landlord will be entitled to physically retake possession on 31 January 2023 which is the earliest date on which it says it will take possession in any event.
140 Further, and in accordance with the usual practice, if the Tenants are relieved against the forfeiture, they will also have to pay the Landlord's costs of the summons on an indemnity basis which costs shall be taxed and payable forthwith. If the conditions are not satisfied, and the forfeiture of the Lease remains, the usual order for payment of standard costs will apply.
141 I do not propose to require as a condition of the grant of any such relief any undertaking with respect to the payment of rent going forward. If further defaults arise under the Lease and/or the Tenants become insolvent, then there is an obvious risk of the Lease being terminated again.
142 I shall hear the parties as to the precise form of order and as to the amounts outstanding, but the order that I propose in draft form[35] is as follows:
(a) the sum of $633,110.40 being the rent outstanding for the period up to and including 31 October 2022; > > (b) the outgoings specified as being payable under the Lease outstanding for the months of November and December 2022 in the sum of $[ ] and outgoings invoiced for the month of January 2023 ; > > (c) the sum of $[ ] being the rent specified as being payable under the Lease for the months of November and December 2022, and January 2023;
on or before 4.00 pm on 30 January 2023;
the plaintiffs be relieved from forfeiture of the Lease between the plaintiffs as tenants and the defendant as landlord dated 15 January 2020 ('the Lease').
- Subject to satisfaction of each of the conditions referred to in paragraph 2 of this order, the plaintiffs pay the defendant's costs of and incidental to the application by amended summons including any costs reserved by orders made 31 October 2022 and 9 November 2022, such costs to be taxed on an indemnity basis and be payable forthwith.
- In the event that the conditions referred to in paragraph 2 of this order are not satisfied, then the plaintiffs shall pay the defendant's costs of and incidental to the application by amended summons including any costs reserved by orders made 31 October 2022 and 9 November 2022, such costs to be taxed on the standard basis.
- The proceeding shall be listed for directions on 31 January 2023 at 2:15pm.
[1] For reasons explained below, on the Landlord's case, re-entry had in fact occurred. Nevertheless, it is clear that the Tenants were in fact seeking to restrain the physical taking of possession by the Landlord.
[4] Presumably as a supporting creditor.
[5] ABC v O'Neill [2006] HCA 46; (2006) 227 CLR 57, [65] (Gummow and Hayne JJ).
[6] Ibid, [19] (Gleeson CJ and Crennan J); [65]-[72] (Gummow and Hayne JJ).
[7] [2020] VSC 838, [10] (Almond J).
[8] MST Lawyers were acting for the Tenants at least on 29 July 2022; see [34] above.
[9] See the discussion in Shercliff v Engadine Acceptance Corp Pty Ltd [1978] 1 NSWLR 729, 735-737 (Mahoney JA).
[12] Applying it to the earliest period of unusability referred to in the Vincent affidavit and the higher percentage referred to by Craig Vincent.
[13] Clyde Croft, Robert Hay and Luke Virgona, Commercial Tenancy Law, (LexisNexis Butterworths, 4th ed, 2018), [17.8]-[17.10].
[15] See, eg, Wongala Holdings Pty Ltd v Mulinglebar Pty Ltd (1994) 6 BPR 13, 427 (Clarke JA), cited in Whild (n 14), [39]; Indrisie v General Credits Ltd [1985] VicRp 20; [1985] VR 251, 254 (Young CJ, Crockett and Nicholson JJ) cited in Whild (n 14) [40]; Barns v Queensland National Bank Ltd [1906] HCA 26; [1906] 3 CLR 925 cited in Whild (n 14) [40], [56].
[17] [2010] NSWCA 268, [327].
[20] Edex International Holdings Pty Ltd v Marmalade Films Pty Ltd (2003) 56 NSWLR 56, [25]-[30] (Hodgson JA).
[21] See Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 43.03(2).
[23] It is not necessary to decide whether clause 13(c) of the Lease precludes such a claim in any event.
[25] [1981] HCA 75; (1981) 146 CLR 249, 311.
[26] Bensons Funds Management Pty Ltd v Body in Balance Chiropractic Pty Ltd [2015] VSC 280, [30] (Croft J).
[28] Donnelly v Amalgamated Television Services Pty Ltd (1998) 45 NSWLR 570, 575 (Hodgson CJ).
[29] [2021] VSC 204, [11].
[30] [1989] VicRp 54; [1989] VR 584, 590-1 ('Jam Factory').
[32] Clyde Croft, Robert Hay and Luke Virgona, Commercial Tenancy Law, (LexisNexis Butterworths, 4th ed, 2018), [19.5].
[33] Provided of course, the default is remedied.
[34] Strictly speaking, in such event rent is not payable as the lease has been forfeit and the tenant will be in occupation as a trespasser and be liable for mesne profits.
[35] This is based on the form of order in Jam Factory (n 30).
Vincent Cold Storage Pty Ltd
Centuria Property Funds No 2 Limited [2022] VSC 766
(2006) 227 CLR 57
(1981) 146 CLR 249
(2003) 56 NSWLR 56
(1998) 45 NSWLR 570