(3) where the primary object of a bargain is to secure a stated result which can effectively be obtained when the matter comes before the court and where the forfeiture provision is security for the production of that result.
21 Very similar principles are applied when one is exercising the statutory jurisdiction.
22 Most of the relevant statutory provisions are contained in Part 8 Division 2 of the Conveyancing Act 1919, a Division headed "Forfeiture" which Division comprises ss 128 to 133 of the Act, particularly s 129. Other provisions dealing with forfeiture are to be found in the Landlord & Tenant Act 1899, ss 8 and following which, although they do not cover the field, give a "statutory flavour" to the proposition that relief should be given to a tenant whose rent is not in arrears for more than six months if the rent is paid.
23 The six months rule appears to have come from the Act 4 George II Chapter 28 (1730) being an Act for the more effectual preventing frauds committed by tenants and for the more easy recovery of rents and renewal of leases. It is neither necessary nor useful to trace through the history of the significance of rent being in arrears for less than six months. Some of that history is set out in Billson v Residential Apartments Ltd [1992] 1 AC 494. As noted below, the rent in the current case was owing for less than six months.
24 Generally, the way in which the statutory power to relieve against forfeiture has been exercised, is almost precisely similar to the way in which the equitable power has been and is exercised.
25 The key case on the subject in this State is the decision of Hope J in Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW Ltd (1970) 2 BPR 9562. Essentially his Honour said that relief against forfeiture is ordinarily given to a lessee whose sole breach is non payment of rent where the rent has now been paid. However, the matter is always discretionary. The history of payment of rent is not necessarily relevant when considering whether to grant relief against forfeiture, but it is relevant when considering whether such order should be refused in the exercise of the court's discretion. Furthermore, a landlord in a relief against forfeiture case is not entitled to rely on any ground which could have been the subject of a s 129 notice but in respect of which no s 129 notice was issued. That decision has been followed on many occasions since, including by the Court of Appeal in Tutita Pty Ltd v Ryleaco Pty Ltd (1989) 4 BPR 9635. See also my decision in Hayes v Gunbola Pty Ltd (1986) 4 BPR 9247, to which both counsel referred me during the oral hearing. A recent example of its operation in Queensland is World by Nite Pty Ltd v Michael [2004] 1 Qd R 338.
26 2. What then, are the special facts which are relied on by the landlords in the instant case as to why relief against forfeiture should not be given?
27 The plaintiff says there are not any. The plaintiff admits that there have been past defaults in the payment of rent, but says these have not been substantial and have all been rectified. At all times the landlords have been protected by a rent guarantee.
28 The cross examination of Mr Wynne threw up the picture of a man who has his finger in a number of pies, who has substantial capital but this is capital which he moves around from one company to another as it suits him and has a tendency to pay bills at the very last moment.
29 The landlords say that this is quite an unsatisfactory state of affairs, not knowing whether Mr Wynne will favour them with payment this month or somebody else.
30 There was deep cross examination into the financial position of Mr Wynne's companies. Some of this cross examination was very successful in that it appeared that no proper accounts were being prepared which accurately set out the true position of some of these companies. The draft accounts which were produced showed quite considerable oddities, not the least of which were payments of six figure sums of management fees to Mr Wynne who does not seem to have had much to produce for the company in return for those fees.
31 Mr Bathurst also relies on the general law rule that this court should not lend its aid to an insolvent company continuing to trade, see Re Data Homes Pty Ltd (in liq) [1972] 2 NSWLR 22. He says, and there is considerable force in the proposition that, unless Mr Wynne's current whim is to invest more funds into the plaintiff, it is insolvent.
32 I considered and rejected a similar submission in Hayes v Gunbola Pty Ltd. I adhere to that decision. The factor is not one that compels a decision in favour of the lessor.
33 All of this evidence about the poor financial state of the tenant would have had considerable impact on me were it not for two factors. One, there is a bank guarantee in place for rent for six months. This surely is a sufficient guarantee of the payment of rent and if there is default for a month or so, then fresh ejectment or re-entry can be effected and no financial loss will be suffered. The second is that the prevailing thought amongst courts dealing with this sort of case is to permit the tenant to have relief against forfeiture notwithstanding a poor rent history, at least on the first application for relief against forfeiture an example being the World by Nite case supra.
34 Accordingly, just looking at the basal facts and factors in this case, there should be some order for relief against forfeiture.
35 3. The 129 notice. Section 129 of the Conveyancing Act derives via intermediate steps from the English Conveyancing Act of 1881. That was an Act deliberately to reform the law put in the hands of Mr E P Wolstenholme conveyancing counsel, an expert in conveyancing law.
36 As I have hinted earlier in section 1, there has been from early times relief against forfeiture in equity. From 1730 there has been relief against forfeiture at common law where the rent is not in arrears for more than six months which was passed down to our Common Law Procedure Act 1899 and our Landlord & Tenant Act 1899.
37 However, Lord Eldon's decision in Hill v Barclay (1810) 16 Ves 402; 33 ER 1037 was read as limiting the right of equity to give relief against forfeiture.
38 The legislature in 1881 thought that this narrowed view should be removed and also that relief against forfeiture should be expanded.
39 The scheme of s 129 was that a tenant should have an opportunity to remedy a breach which was capable of remedy and should have time to apply to the court to get relief against forfeiture before re-entry.
40 The obligation to give a s 129 notice, even if there is a breach which is incapable of remedy is made clear by such cases as Horsey Estate Ltd v Steiger & Petrifite Company Ltd [1899] 2 QB 79, 91 and Batson v De Carvalho (1948) 48 SR (NSW) 417, 425.
41 Of course, in this context a breach capable of remedy does not mean a breach which the tenant is able to remedy. In Batson's case Sugerman J gave the illustration of a breach which requires the tenant to effect repairs where the tenant is actually unable to effect repairs because of a war time shortage of building materials. See also the judgment of Mummery, J in Billson v Residential Apartments Ltd (1990) 60 P & CR 392.
42 The Billson case went on appeal to the Court of Appeal and House of Lords where it is reported as Billson v Residential Apartments Ltd [1992] 1 AC 494. The actual decision was reversed because the House of Lords came to the view that the English equivalent of s 129 still was available to a tenant despite the fact that the landlord had physically re-entered. The precise points to which I have referred were not further discussed. Indeed, the report of p 500 shows that Browne-Wilkinson VC as his Lordship then was, told counsel that the court did not intend to decide whether the breach was remedial. Browne-Wilkinson's VC judgment is significant in that it traces the history of s 129, but otherwise does not affect the result of this case.
43 Broadly speaking, breaches of covenant in a lease must be put into two classes: (a) positive covenants; and (b) negative covenants. A positive covenant such as "The tenant shall ensure" is usually (but not always) capable of remedy by actually doing the thing covenanted to be done albeit late. However, a negative covenant, a covenant not to do something, is usually not capable of remedy; see Expert Clothing Service & Sales Ltd v Hillgate House Ltd [1986] Ch 340.
44 In the instant lease, clause 12.1 is headed "Events of Default". The clause continues:
"If at any time: … (f) the lessee … (v) has a receiver or manager of any of its assets appointed … THEN … the lessee will be deemed to have defaulted under this lease and … the lessor has the following rights … B. To re-enter the land and the building, expelling the lessee and the persons under its control."
45 In a technical sense, clause 12 does not involve covenants at all, rather it merely lists events which, if occur, can break the lease. The lease accordingly comes to an end not because of breach but because of agreement; see eg Shevill v The Builders Licensing Board (1982) 149 CLR 620.
46 The cases, or at least the English cases, show that there may well be a vital difference between a provision in the lease being an option to terminate, conditional upon the happening of an event or whether it is truly a re-entry under a forfeiture, Cadogan Estates Ltd v McMahon [2001] 1 AC 378, per Lord Hoffmann at p 385.
47 Lord Millett at 390 made it clear that a proviso for re-entry normally does not impose any obligation express or implied on the part of the tenant not to cause or suffer anything which would entitle a landlord to exercise his right of re-entry.
48 Viewed in this way, there can be no breach of clause 12.1 and accordingly there is nothing on which s 129 can operate.
49 I was referred to the decision of Ashworth J in Warner v Sampson (No 2) [1958] 1 All ER 314; [1958] 1 QB 404, 424, which held that the English equivalent of s 129 does not apply where the forfeiture operates by operation of law such as where the tenant denies the landlord's title. However, this decision was reversed by the Court of Appeal in Warner v Sampson [1959] 1 QB 297, but as the Court of Appeal held there was no forfeiture it did not have to consider the relief point. The case was referred to because, like clause 12.1 in the instant case, if I can quote the words of Lord Hoffmann in Cadogan Estates Ltd v McMahon at 383, "The re-entry clause is expressed as a series of conditions, rather than obligations. Furthermore, the sole purpose of the conditions is to specify the events in which the landlords will be entitled to re-enter and resume possession."
50 However, in Halliard Property Co Ltd v Jack Segal Ltd [1978] 1 WLR 377, Goulding J held that the words "breach of condition" in the English equivalent of s 129(1) must be read widely and apply to a condition that the landlord could re-enter if there was bankruptcy of a surety.
51 In Cadogan at 385, Lord Hoffmann said that this was a question of construction as to which side of the line something fell; was it a condition within 129 or was it merely another expression of the tenant's obligation to yield up possession if certain things happened.
52 In Della Imports Pty Ltd v Birkenhead Investments Pty Ltd (1987) NSW Conv R 55-358, M McLelland J considered the matter and considered that s 129 applied to cases where the termination was to take place on the happening of an event as well as where it was to take place on a breach.
53 The matter does not need to be decided in this case. However, with respect, I would follow the approach of McLelland J. If that were wrong, I would concur with Goulding J and give s 129 a wide operation. I think this view is reinforced by s 129(10).
54 The right to terminate on the happening of an event that the lessee has a receiver appointed comes very close to a negative covenant promising not to have a receiver appointed. As such it comes within the irremedial class referred to in the cases to which I have already referred. An example of this rule is Rugby School (Governors) v Tannahill [1934] 1 KB 695, where the tenant was using her house as a brothel and that breach was not remedied by ceasing to use the house for such a purpose.
55 Accordingly, the only purpose of the 129 notice was to give the tenant an opportunity to approach the court for relief against forfeiture before re-entry.
56 However, the question is whether an event occurs in clause 12 if the landlord itself has brought about the event.
57 Generally speaking, it is safe to assume that a person consents to what he himself did: Re Wilmer's Trusts [1910] 2 Ch 111, 119 and Kemp v Gough & Gilmour Holdings Pty Ltd (1995) 86 LGERA 63, 67-68. The final words of clause 12 of the lease indicate that if an event happens, then notwithstanding any prior waiver or failure to take action by the lessor or indulgence granted by the lessor to the lessee, the lessor has the right to terminate the lease. This would seem to indicate that it was recognised by the parties that a current waiver or indulgence by the lessors would be operative and lend some support to the view that where there is a landlord who has consented to a receiver being appointed or who has consented to the company being wound up, then there is no event of default.
58 This is reinforced by the fact that s 123 of the Conveyancing Act makes it clear that a consent to what would otherwise be a breach or forfeiture operates to remove that breach or forfeiture as providing a base for re-entry.
59 However, it will be remembered that the landlords having originally given the notice then withdrew that notice and took the position that it had been given by mistake and ought never to have been given. The landlords may well be estopped by taking this position though this is doubtful as it is not at all clear how anyone was affected by the landlords' conduct. If, however, the landlords are to be treated as never having given a s 129 notice, then they could not re-enter for the alleged breach in 12.1(g)(v) as, apart from non-payment of rent, even if the breach is not capable of remedy, a notice must first be given specifying the breach complained of so that the tenant can go as quickly as possible to seek relief against forfeiture before the landlord re-enters; see Billsons' case supra.
60 Even if the notice despite the landlords' now protestations was valid, relief against forfeiture would be given in situations where a landlord himself puts in a receiver as the purpose of clause 12.1(f) is to protect the landlord against a situation where the company is in dire financial straits because of external matters and not to confer some right on the landlord to terminate the lease at whim.
61 Accordingly, it does not seem to me to matter very much whether the putting in of the receiver did amount to a breach of the lease or not.
62 The other matter that must be of concern is whether a person once issuing a s 129 notice can then before its expiry, say that it was issued by mistake (even if that be the truth) and physically re-enter. Once a person takes a step and communicates that step, usually he or she may not withdraw. Moreover, once a person embarks on a course of letting his or her tenant know that proceedings for ejectment will be taken in the "gentleman's way" by notice and action, there may be an election against physical re-entry; see Argyle Art Centre Pty Ltd v Argyle Bond & Free Stores Co Pty Ltd [1976] 1 NSWLR 377. Again, it is not necessary to pursue this matter.
63 4. A key point in Mr Brereton's presentation was that if the re-entry was allowed to stand, the landlords would get the benefit of millions of dollars which had been spent by the tenant in upgrading the hotel.
64 Mr Pantlin, one of the principals of the trusts behind the landlords, agreed at T48 that it would be advantageous to secure occupation of the premises with the benefit of the increased turnover and the benefit of the development approval which the plaintiff had obtained. Counsel even obtained the following answer:
"Q. And you hope to do that without having to pay yourself one cent for that don't you?
A. Yes.
Q. And so far as you are aware, your partner … shares such hopes?
A. Yes."
65 I should add that during the cross examination Mr Pantlin said that whilst he hoped to obtain the business of the hotel with the benefits without having to pay for them, that was merely the end result. His motive was to remove a tenant that has caused enormous difficulty.
66 He was further cross examined about "enormous difficulty", but although he tried, he was able to convince neither the cross examiner nor the court that there was anything like enormous difficulty in keeping the tenant, though the tenant is obviously a person who has to be watched closely to make sure that he actually pays the debt owing to oneself rather than other debts owed by his enterprise to other parties.