Leda Commercial Properties Pty Limited v Dhk Retailers Pty Limited [1992] ACTSC 113; (1992) 111 FLR 81 (10 November 1992)

SUPREME COURT OF THE ACT

LEDA COMMERCIAL PROPERTIES PTY LIMITED v. DHK RETAILERS PTY LIMITED
No. SC 486 of 1992
Number of pages - 41
Landlord and Tenant - Practice and Procedure
[1992] ACTSC 113; (1992) 111 FLR 81

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Higgins J.(1)

CATCHWORDS

Landlord and tenant - Commercial lease - Sublease - Breach - Interpretation - Right to re-enter - Re-entry - Repudiation and surrender - Conduct - Estoppel - Principles - Whether landlord entitled to damages for breach of covenants.

Landlord and tenant - Commercial lease - Breach - Effect of Notice of Re-entry - Sufficiency of Notice - Whether premises abandoned or temporarily vacated for refurbishment.

Practice and procedure - Interlocutory judgment - Summary judgment - Rules of the Supreme Court of the Australian Capital Territory O.15 - Principles.

Real Property Act 1925, s.103A

Trade Practices Act 1974 (Cth)

Forfeiture of Leases Act (NSW) 1901, s.1

Conveyancing Act 1919 (NSW), s.129

Williams Supreme Court Practice (2nd ed) Vol 1, 1190

Shevill v. Builders Licencing Board [1982] HCA 47; (1982) 149 CLR 620

Trans-Pacific Ins. v. Grand Union Ins. (1989) 18 NSWLR 675

Braidotti v. Queensland City Properties Ltd [1991] HCA 19; (1991) 172 CLR 293,

Jennings Industries Ltd v. Commonwealth of Australia (1984) 57 ACTR 5

Ex parte Whelan (1986) Qd R 500

McFadyen v. Measures (1910) 10 SR (NSW) 190

Holden v. Blaiklock (1974) 2 NSWLR 262

Gerraty v. McGavin [1914] HCA 23; (1914) 18 CLR 152

Johnson v. Senes (1961) 78 WN (NSW) 861

Ex p Taylor (1980) Qd R 253

Singman v. Lyons (1922) VLR 719

David Buchanan v. Edward Byrnes [1906] HCA 21; (1906) 3 CLR 704

Ripta Pty Ltd v. Maggiore Bakeries Pty Ltd (1984) VR 629

The Progressive Mailing House Pty Ltd v. Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17

Wood Factory Pty Ltd v. Kiritos Pty Ltd (1985) 2 NSWLR 105

Laurinda Pty Ltd v. Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623

Charmar Electrical Pty Ltd v. Minda Incorporated (1990) 55 SASR 112

Fitzgerald v. Masters [1956] HCA 53; (1965) 95 CLR 420

Sargent v. ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634

Waltons Stores (Interstate) Ltd v. Maher [1988] HCA 7; (1988) 164 CLR 387

The Commonwealth v. Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64

Amev Finance Ltd v. Artes Studios Thoroughbreds Pty Ltd (1989) 15 NSWLR 564

HEARING

CANBERRA, 28 AUGUST 1992
10:11:1992

Counsel for the Plaintiff: Mr J Purnell

Instructing solicitors: Messrs Mallesons Stephen

Jaques

Counsel for the Defendant: Mr B Meagher

Instructing solicitors: Messrs Tribe Conway and Co by
their City Agents
Ken Johnston Bedford and Co

ORDER

The Court orders that:
1. Leave is given to the plaintiff to amend the statement of claim.

2. Subject to that amendment being made within seven days, the plaintiff is

to then be at liberty to enter interlocutory judgment against the defendant for damages to be assessed.

DECISION

HIGGINS J. This is an application by the plaintiff for final judgment in the sum of $132,703.64. Alternatively, the plaintiff seeks interlocutory judgment. The defendant opposes that application. It further contends that the plaintiff should not be permitted to amend its claim to seek the alternative remedy of interlocutory judgment.

2. The statement of claim endorsed upon the writ of summons, issued 14 July 1992, claims

"... loss and damage as a result of the defendant's breach of the
Sublease, the Deed of Agreement for Lease and the deed dated 12 June
1992. The total amount due to the plaintiff from 1 August 1992 to the
expiry of the Sublease term is $132,703.64."

The procedure
3. The action pleaded is one in respect of which summary judgment may be sought pursuant to Order 15.

4. Rule 1(2) provides that on such application

"The Judge may thereupon, unless the defendant satisfies him that he
has a good defence to the action on the merits, or discloses such facts
as are deemed sufficient to entitle him to defend the action generally,
make an order empowering the plaintiff to enter such judgment as is
just, having regard to the nature of the remedy or relief claimed."

5. Whether interlocutory judgment or judgment for a particular sum should be entered simply raises a question as to what is "just". The power of amendment is wide (see Williams Supreme Court Practice (2nd ed) Vol 1, 1190). It should be so exercised as to assist in resolving the real matters in dispute between the parties as expeditiously as possible. I, therefore, allow the amendment of the notice of motion to include a prayer for judgment for damages to be assessed.

6. Rule 2 requires the application to be made "... by summons returnable not less than two clear days after service ..."

7. The application in the present case is by notice of motion. However, no point was taken as to the lack of a summons. No substantive disadvantage has accrued to the defendant. Consequently, I proceed with the application as if the notice of motion was a summons.

8. I now turn to the facts upon which the plaintiff relies. The Facts
The application was supported by a number of affidavits. The "Sublease" referred to in the Statement of Claim was identified by Ian Cedric Hardy, Centre Manager of the Tuggeranong Hyperdome. The plaintiff is the Crown Lessee of that retailing centre. There was a Deed of Agreement for Lease (the "Deed") entered into between the plaintiff and the defendant and dated 22 April 1987. The Deed incorporated, by reference, a "Memorandum of Provisions" dated 14 November 1986 and registered pursuant to s.103A of the Real Property Act 1925.

9. There had been a previous dispute between the parties arising out of the Deed. An action arising out of that dispute (SC 438/91) was settled by means of the parties entering into another deed which was dated 12 June 1992. That deed recited (inter alia) that the parties had agreed that the action would be settled upon the defendant paying $11,115.98. The terms of the Deed and the Lease thereby created were otherwise confirmed. The defendant waived all claims arising out of alleged breaches of the Trade Practices Act 1974 (Cth) relating to the lease agreement. There was also a more general release of all claims.

10. The Lease created by the Deed, related to an area of the Hyperdome known as Shop No. GA6. The defendant occupied the premises from 9 November 1987.

11. On 15 June 1992, Mr Hardy noticed that the defendant's trading stock appeared to have been removed from its shop area. The doors were closed. It was not open for business. He instructed a solicitor, Mr Malcolm Brennan, to seek an explanation of this apparent state of affairs.

12. Mr Brennan got no informative response. As a result, on 22 June 1992, Mr Hardy caused a notice to be given to the defendant. That notice purported to be pursuant to the Forfeiture of Leases Ac t (NSW) 1901 as it applies in the Australian Capital Territory. That Act requires a lessor to give such a notice before exercising any right of re-entry or forfeiture arising from breach of any covenant or condition contained in or created by a lease.

13. The breach relied upon by the plaintiff in that notice was that of an obligation to

"... cause any trade or business conducted in the premises to remain
open for business for not less than the regular customary days and
hours for businesses of the like nature in the trading area in which
the Centre is located."

14. The notice demanded that the defendant open the demised premises for business on or before 6 July 1992 and keep open (by inference) for the usual days and hours of business. The notice was, on 22 June 1992, affixed to the door of the demised premises. A copy was served on the defendant's registered office on 26 June 1992.

15. The business was not re-opened. The premises remained apparently unoccupied.

16. On 7 July 1992, a "Notice of Re-entry" was issued and served. That notice alleged that, contrary to cl.15.04 of the Memorandum of Lease Provisions, the defendant had vacated or abandoned the premises and had failed to re-open the same for business by 6 July 1992. Clause 15.06 was relied upon as empowering re-entry. The notice was affixed to the premises. The locks were changed. A copy was, on 15 July 1992, served at the defendant's registered office.

17. Mr Hardy then calculated rent and other sums due to the plaintiff, had the lease continued to 8 November 1993, as being $132,703.64. That is the amount for which judgment is sought. Mr Hardy attests to a belief that the defendant has no defence to the claim made.

18. There were some supporting affidavits. Mr Paul Skinner, Retail Manager of the plaintiff, deposed that on 15 June 1992, before 10.00am, he had passed shop GA6. Business was being carried on as usual. Between 10.00 and 10.30am he observed that the stock appeared to have been removed. The doors to the shop were closed.

19. Mr Frederick Warren, a security guard, deposed that on 15 June 1992 at about 9.45am, he noticed clothing on clothing racks being removed from the shop. He spoke to one of the persons then working in the shop.

20. She told Mr Warren that they were changing all of the old stock for new. Some stock, being "the latest fashion" would remain, she said.

21. About 10.15am, Mr Warren noticed that the shop seemed closed. There was no notice on the doors to indicate when the shop would re-open. It appeared to have been vacated.

22. A conclusion that the defendant had "vacated or abandoned" the demised premises would follow inevitably from the above facts if left unexplained.

23. The defendant did not dispute the objective facts as deposed to in the plaintiff's evidence. There were some differences as to times at which the events occurred on 15 June 1992. The precise words spoken by the person at the shop to Mr Warren were also in dispute. Those differences would not, however, alter the conclusion, reasonably conveyed by the objective circumstances, that the defendant had vacated the shop on 15 June 1992.

24. Mr Paul Conway, a solicitor, adduced correspondence passing between his firm (on behalf of the defendant) and the plaintiff's solicitors. He also deposed that, when spoken to by Mr Brennan on 22 June 1992, he said "I do not have instructions to say anything" rather than "my instructions are not to say anything to anybody". I do not, however, think that anything turns on that difference.

25. In response to the "Notice pursuant to the Forfeiture of Leases Act", Mr Conway wrote, on 29 June 1992

"Our instructions are that our client does not regard itself as
being in breach."

This statement offered no explanation or assurance in relation to the apparent abandonment of the demised premises.

26. Following service of the "Notice of Re-entry", Mr Conway wrote again to the plaintiff's solicitors. Noting the barring of access to the defendant, he wrote

"We are instructed that in so doing your client has repudiated the
provisions of the lease. We are instructed that our client previously
informed the security guard of the premises that our client would be
renovating and refurbishing the premises."

The letter went on to purport to accept the so-called repudiation, reserving the right to claim damages and refusing to pay further rent.

27. In a subsequent affidavit, Mr Conway detailed correspondence leading to the Deed of Compromise of 12 June 1991. This was tendered, not to re-hash that dispute but, it was said, to render it unlikely that the defendant would simply have abandoned the premises or, I assume, that the plaintiff would so conclude.

28. Mr David Khedoori, a director of the defendant, deposed that, initially, the shop was, prior to 15 June 1992

"largely selling evening wear with some day wear and close-out
lines. There was a wide variety of merchandise offered for sale
and the image was somewhat down market."

He said that he had discussed with the shop manager, Mrs Calvin, the poor trading results of the business. The shop traded under the name "Adazz". It had been, he stated, the defendant's intention to change the image of the shop by trading under the name "Harts", retailing a more "feminine and upmarket evening wear" range.

29. He arrived in Canberra on 15 June 1992 with Mrs Calvin. They went to the shop at 9.45am. He disputed the statements made by Mr Skinner and Mr Warren as to the time at which the shop closed that day. He conceded, however, that the shop closed between 11.15 and 11.30am. He confirmed that the stock and movable fixtures were, by then, removed. This was, he said, to enable renovation and refurbishment to suit the "Harts" format.

30. Mrs Calvin confirmed Mr Khedoori's evidence. She added that she had spoken to Mr Warren whilst the stock was being removed. She said that her statement to him was

"We're taking everything out, and giving the shop a whole new
look."

She further said that she had intended to place a pre-prepared sign in the windows, stating

"Harts opening
New Concept Store
Opening soon
Harts"

She forgot, however, to put it on display.

31. It was conceded that the plaintiff was not informed of the defendant's plans. Mrs Calvin said

"I did not think about the need to tell the plaintiff of the
refurbishment or the change in concept within the shop."

32. In reply, Mr Hardy deposed to the usual days and hours of business for clothing stores within the Hyperdome. The closure of the shop for the purpose of refurbishment would clearly have entailed that shop being closed for business during such hours and on such days. He further confirmed that the defendant had at no time sought consent to make the alterations referred to by the defendant. This was, he asserted, contrary to cl.5.16 and cl.5.17 of the Memorandum of Lease Provisions previously referred to.

33. The lack of prior consultation and the failure to place a notice on the shop premises or to respond to Mr Brennan's reasonable request for an explanation could be advanced as a reason for rejecting the evidence of Mr Khedoori and Mrs Calvin as to the purpose of the closure of the business. For the purposes of this application, however, I accept that a court could well conclude that the purpose of the closure was as stated by them.

34. It is necessary, therefore, to consider whether the closure of the premises by the defendant enabled a lawful re-entry by or on behalf of the plaintiff. That is, whether a lack of intention to vacate or abandon the premises on the part of the defendant affords a possible defence.

Entitlement to Re-enter
35. Reference was made to cl.5.16 and cl.5.17. Those clauses (so far as relevant) provide as follows

"5.16 LESSEE'S TRADE NAME - The Lessee (that is, the defendant) will
trade only under such name as is approved of in writing by the Lessor
(that is, the plaintiff) which approval shall not be unreasonably
withheld. ..."
"5.17 ERECTION OF SHOPFITTINGS - The Lessee shall not ... affix any
shopfittings to the floors, walls or ceilings of the Demised Premises
without the prior written consent of the Lessor which consent may be
granted or refused or granted subject to conditions in the discretion
of the Lessor. ..."

36. It follows that the defendant would have needed to seek the plaintiff's consent to carry out the refurbishment it proposed.

37. It may be added that cl.7.01 required "any alterations or improvements" to have been the subject of "prior consent in writing of the Lessor which consent shall not be unreasonably refused or withheld ...". Clause 7.02 provides a detailed procedure for seeking that consent.

38. Clause 15.04 provides

"DEFINITION OF DEFAULT - It is a fundamental and essential term of this
Lease that the Lessee shall be in default in any of the following
circumstances:
15.04.4 Breach of covenants - if the Lessee shall fail to observe,
perform or fulfil any of (sic ... the ?) other terms, covenants,
conditions and restrictions herein contained on the part of the Lessee
(whether positive or negative) contained or implied in this Lease; or
15.04.09 Lessee abandons premises - if the Lessee vacates or abandons
the Demised Premises;"

39. Clause 15.06 then provides

"FORFEITURE OF LEASE - If the Lessee shall be in default as aforesaid
the Lessor may at its option -
15.06.1 Determination by re-entry - without any prior demand or notice
(by force if necessary) re-enter into and take possession of the
Demised Premises or any part thereof in the name of the whole and eject
the Lessee and all other persons therefrom and repossess and enjoy the
same as of its first and former estate therein and thereupon this Lease
shall be absolutely determined;"

40. The clause also provides that the power of re-entry will not be exercised until 14 days notice has been given requiring remedy of any breach complained of. That clause is not inconsistent with s.1 of the Forfeiture of Leases Act. No issue arises, in this matter, as to lack of sufficient notice. The plaintiff gave 14 days' notice requiring remedy of the alleged breach. Fourteen days was a reasonable time within which to remedy the breach alleged whether by re-opening or by seeking the consents necessary to engage in re-furbishing.

41. If a breach has occurred and the lease is validly determined as a result of it, the Memorandum of Lease Provisions then makes provision for damages, in the following terms (relevantly)

"15.08 DAMAGES FOR BREACH - In the event of the Lessor determining the
Term hereof by reason of the default of the Lessee the Lessee shall pay
to the Lessor ... by way of damages for loss of its bargain the amount
(if any) by which the rent hereby reserved between the date of
determination and the date of expiry of this Lease by effluxion of time
exceeds the rent received or likely to be received from any other
Lessee to whom the Demised Premises are relet or may be relet during
such period..."

The clause goes on to place the onus of proving the credit against the total loss on "the person alleging it". That would, presumably, be the Lessee.

Breach of lease provisions
42. As I have noted, the conduct of the defendant, even as the defendant concedes it to have been, justified the plaintiff in concluding, as it did, that the defendant had chosen to close its business and not trade during the hours and on the days it had covenanted to trade. A persistence in that closure would, in the absence of explanation, warrant a conclusion that the defendant had vacated or abandoned the demised premises. I do not think that the history of previous dealings between the parties, resulting in a deed of settlement of their dispute, detracts at all from the force of that conclusion.

43. The next question is whether the subjective intention of the defendant to refurbish and then re-occupy the premises if so found as a fact, would alter the situation.

44. So far as the issue of breach is concerned, the failure to seek consent for the alterations proposed to the demised premises was not relied on as a breach of the agreement between the plaintiff and the defendant. I need not consider, therefore, whether, if the alterations had been embarked upon without the consent of the plaintiff, there would have been a breach of cl.15.04.4.

45. However, apart from the apparent vacation or abandonment of the demised premises there are also the obligations, which the defendant undoubtedly breached, of maintaining usual days and hours of trading.

46. I do not believe cl.15.04.4 was intended to allow any breach of covenant, however trivial, to found a right of re-entry. The process of notice clearly focusses on terms of the agreement which, if the lessee persists in breach thereof, would evidence an intention not to be bound by the leasing agreement. Of course, cl.15.04. also focusses on specific obligations the breach of which are expressly agreed to confer a right of re-entry if that breach remains unremedied or if the forfeiture is not made the subject of equitable relief.

47. Clause 15.04 is, clearly enough, an attempt to modify the effect on the agreement of Shevill v. Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620. That was a case of persistent late payment of rent. There was an express reservation of a right of re-entry upon such a default.

48. Gibbs C.J., at p 627, noted that it was open to parties to a lease to agree that any breach of a term, however trifling, would constitute a lawful ground to terminate the lease by re-entry. However, his Honour noted

(628) "... it would require very clear words to bring about the
result, which in some circumstances would be quite unjust, that
whenever a lessor could exercise the right given by the clause to
re-enter, he could also recover damages for the loss resulting from the
failure of the lessee to carry out all the covenants of the lease -
covenants which, in some cases, the lessee might have been both willing
and able to perform had it not been for the re-entry."

Wilson J. noted that a proviso for re-entry is traditionally viewed as a security for the performance of covenants to pay rent (at p 634). That role is not confined to such covenants. In Shevill, the right to exercise the power of re-entry on failure to pay rent for 14 days was not challenged. Nevertheless, that case supports the view I take of the proper construction of cl.15.04.4.

49. The issue in Shevill's case was whether a consequential right to damages flowed from the exercise of the power of re-entry following default. The clause saving other remedies in the event of re-entry did not itself confer the right to a consequential remedy which otherwise would flow only if there had been repudiation of the lease by the lessee. That would follow only if the lessee breached, and refused to remedy, an essential term of the lease.

50. It is instructive to note his Honour's comment on the choice of remedy by the lessor in that case

(637-8) "Re-entry was a drastic step which the Board ought to have
taken not only if it desired to be relieved of an unsatisfactory
tenancy but provided it had another one to take its place. If it
exercised its right of re-entry only in order to apply greater pressure
on the tenant with a view to regular payments of rent in future, it
took the risk that the lessee would accept the forfeiture. That is
what happened, with the result that the Board effectively terminated
the lease and secured possession of premises which it could not
thereafter let for a considerable time, that consequence was not the
fault of the former lessee."

51. It is relevant to note that, ordinarily, the final step of determination of a lease is reserved for breach of an essential term (see, for example, Trans-Pacific Ins. v. Grand Union Ins. (1989) 18 NSWLR 675, 701-3 per Giles J.).

52. It seems to me, that, in context, cl.15.04.4 refers to a breach of the agreement of sufficient gravity as to evince an intention to repudiate it. That would, of course, sit well with the view that such a breach could be rationally viewed as a "fundamental" breach or the breach of an "essential" term.

53. I would, therefore, conclude that conduct which breached the terms relating to opening for trading would not, by itself, suffice to activate the power in cl.15.06.1.

Effect of Notice of Re-entry
54. The Notice of Re-entry suffers from the defect referred to by Kelly J. in Jennings Industries Ltd v. Commonwealth of Australia (1984) 57 ACTR 5. It does not rely upon the ground or the breach asserted in the previous Notice of 22 June 1992 for its efficacy. To an extent, of course, there is some overlap. A failure to remain open for usual days and hours of business is not, however, necessarily identical with a vacation or abandonment of the premises.

55. There is no requirement under the Forfeiture of Leases Act 1901 for a Notice of Re-entry. All that is required to terminate the lease is a "re-entry'. A notice accompanying the act of re-entry is not essential to the validity of that re-entry.

56. What is required for a "re-entry" was considered by Thomas J. (Kneipp and Shepherdson JJ. concurring) in Ex parte Whelan (1986) Qd R 500. There was an actual entry on premises which was alleged by the landlord to be a "re-entry". The tenants declined to leave. The landlord's contingent retreated without changing the locks or taking the matter any further than entry and announcement that it was a "re-entry". Thomas J. considered that physical expulsion of the tenant and/or other occupants or service of a writ for possession were not the sole prerequisites for re-entry. It was enough that the landlord had left no doubt as to the purpose of the entry. The landlord's actions therefore constituted a valid re-entry.

57. In the present case, not only was a "Notice of Re-entry" served but the landlord's representatives gained entry to the shop and excluded access by changing the locks and adding additional locks. Indeed, the defendant complains that it has been excluded from the shop on and from 7 July 1992 by the actions so taken on that day. There is no doubt that on that day, the plaintiff took all such steps as were necessary to evince an intention to forfeit the term granted by the Lease.

58. However, insofar as the plaintiff relies on a breach of cl.15.04 to found a right of re-entry pursuant to cl.15.06, it has failed to give a valid notice of intention to effect that re-entry. The notice fails because it does not complain of a fundamental breach of the lease or the breach of an essential term of it, whether that characteristic is conferred by a stipulative agreement or by the objective circumstances of it.

59. It follows that it is, at least, seriously arguable that the re-entry effected on 7 July 1992 was not authorised or permitted by the provisions of the Lease or any of them.

60. This case, however, is not one where reliance is placed merely on unauthorised closure. The substantive complaint, relied on by the Notice of 7 July 1992, was the vacation or abandonment of the premises contrary to cl.15.04.9. Consistently with my view of cl.15.04.5, I do not regard cl.15.04.9 as referring to a mere temporary vacation of premises but such a cessation of occupation as to amount to a repudiation of the agreement. I would note, at this point, that the lease agreement in this case differs from, say, a residential lease. In the latter case, the landlord may well be indifferent to whether the tenant actually occupies the demised premises. It is clear that the landlord of shopping centre space has a real interest in ensuring each tenant trades to the fullest possible extent (see, for example, cl.15.04.10).

61. If, as the plaintiff believed, the defendant, in closing its doors, was evincing an intention not to re-occupy the demised premises, there was a breach of cl.15.04.9. However, if the defendant was evincing an intention to refurbish and re-occupy those premises, as it now claims, it would not, in fact, then be in breach of cl.15.04.9. It would not, in fact, have "vacated or abandoned" the premises.

62. However, that does not conclude the matter in favour of the defendant on this application.

Sufficiency of Notice
63. It is, in view of my finding as to the ground relied on in the notice of 22 June 1992, strictly unnecessary to consider its formal validity. I will, however, do so for the sake of completeness.

64. If a right of re-entry had arisen so that s.1(1) of the Forfeiture of Leases Act required notice, it is well-established that failure to give a sufficient notice will lead to an inability to exercise the right of re-entry reserved by the lease.

65. In McFadyen v. Measures (1910) 10 SR (NSW) 190, Cullen C.J. (Pring and Sly JJ. concurring), referring to the notice under the Forfeiture of Leases Act, held that failure to give notice was fatal to the valid exercise of a right of re-entry and rendered a purported re-entry unlawful. The requirement refers to any type of forfeiture of the term of the lease, even that of replacing it by a weekly term (see Holden v. Blaiklock (1974) 2 NSWLR 262).

66. The notice must also be sufficient in form. In Gerraty v. McGavin [1914] HCA 23; (1914) 18 CLR 152 it was held that a notice relying on lack of repair was bad if it merely alleged lack of compliance with the covenant in question. The particular lack of repair relied on had to be specified. The notice must also set out the ground upon which re-entry is actually effected. (See Johnson v. Senes (1961) 78 WN (NSW) 861 and Jennings Industries Ltd v. Commonwealth of Australia (supra).)

67. It is also essential that the notice expressly require remedy of the breach and allow a reasonable time, for so doing. It must specify the acts required for remedy of the breach.

68. In ex p Taylor (1980) Qd R 253, the prescribed notice was required, by a "NOTE" at the foot of it, to extend a reasonable time to remedy the breach complained of. D M Campbell J. considered that stipulation to be an essential prerequisite to the valid exercise of a right of forfeiture.

69. It may be noted that the Notice in this case, whilst it does not give particulars of the closure, substantively informs the defendant of the breach complained of and the steps required for its remedy. Substantial compliance is what is required (see, for example, Singman v. Lyons (1922) VLR 719).

70. Accordingly, had the notice been supported by the breach of which it complains being sufficient to activate the power of re-entry, I conclude that it would have been sufficient in form. Repudiation and Surrender

71. However, the fact that the resumption of possession by the lessor was not authorised by the contract does not require a finding for the defendant.

72. At common law, a finding that the tenant has by conduct surrendered the term or repudiated the lease is not precluded by an unsuccessful attempt at the exercise of powers of determination pursuant to the terms of the Lease.

73. There are two issues involved. The first is whether the parties to a lease may agree to end it or one may accept that the other has unilaterally done so without the need for any specific term of the lease authorising such a consequence. The second is whether the innocent party has a right to damages in the event that the repudiation of the agreement by the other party is accepted.

74. An early case which addressed those issues is David Buchanan v. Edward Byrnes [1906] HCA 21; (1906) 3 CLR 704. There the tenant had abandoned the premises, having failed to pay rent and to observe other covenants. It was accepted that, by re-entering, the lessor had implicitly accepted a proposal by the lessee to surrender his term. It was, Griffith C.J. stated

(714) "...as complete a breach of the covenant to carry on the
business as it was possible for him (that is, the tenant) to commit,
and under these circumstances the plaintiff had at once a complete
cause of action against him. He was entitled to bring an action
forthwith for the breach of that covenant, and he was entitled to such
damages as would properly flow from such a breach of contract."

75. There was some controversy as to whether the ordinary incidents of contract law, including repudiation, applied to leases but it may now be accepted that they do. It follows from this that in addition to, or in substitution for, contractual rights of termination of a lease, repudiation and acceptance will also be available.

76. In Ripta Pty Ltd v. Maggiore Bakeries Pty Ltd (1984) VR 629, the lessee committed various breaches of covenant. The lessor accepted the lessee's wrongful acts as repudiating their agreement but then sought to serve a demand for rent pursuant to a term of the lease agreement allowing termination if rent, being outstanding for 14 days, was not paid after due notice was given. Gray J. was of the opinion that those notices were nullities. They did not revive the term. It had been terminated upon acceptance by the lessor that the lessee had wrongfully repudiated the lease. An act of acceptance of wrongful repudiation terminates the lease as against each of the parties to it.

77. What constitutes repudiation may well differ according to the circumstances. In The Progressive Mailing House Pty Ltd v. Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17, a refusal to pay rent, relying on a baseless claim that the lessor had failed to carry out improvements, was considered to be, in the circumstances, a repudiation by the lessee of its obligations. There was an express power, exercisable on notice, to effect termination of the lease by re-entry. Mason J. did not, however, consider that fact sufficient to exclude the common law right to accept a repudiation of the lease agreement and, by so doing, validly terminate the lease. His Honour said

(30) "If it be accepted that the principles of contract law apply to
leases, it is not easy to see why the mere presence of an express power
to terminate should be regarded as excluding the exercise of such
common law rights as may otherwise be appropriate. It is, of course,
open to the parties by this contract to regulate the exercise of the
common law right to determine for repudiation or fundamental breach."

Abandonment of the premises would, in his Honour's opinion, ordinarily be seen as a repudiation or fundamental breach of a lease agreement.

78. Deane J. considered that the lessee had rendered itself liable to termination for failure to pay rent. That was an event warranting re-entry under the terms of the lease. It had, by the same conduct, rendered itself liable to termination of the lease upon acceptance by the lessor of a repudiation which was constituted by the lessee's fundamental breach of the lease.

79. His Honour noted

(55) "It follows from the forgoing that, in the circumstances which
had arisen, the landlord had both a contractual right to terminate the
lease by re-entry under cl.10.1 for breach of covenant and, on the
application of the ordinary principles of contract law, a common law
right to terminate for fundamental breach. The landlord was not
obliged to elect between the two grounds for terminating the lease: it
was entitled to rely upon them both."

80. I note that the clause referred to in The Progressive Mailing House expressly provided that the means of termination it provided was without prejudice to any other right so to do.

81. In Wood Factory Pty Ltd v. Kiritos Pty Ltd (1985) 2 NSWLR 105, notice of intention to re-enter for non-payment of rent was given. Subsequently, but without re-entry being effected, there was a suit for, and payment of, arrears of rent. The landlord also advertised for a new tenant. The lessee was, over this period, gradually moving its possessions out of the premises. It had indicated that it had no objection to the landlord finding another tenant. It vacated completely in June 1980. Another occupant took up possession for a few weeks in July 1980 and then vacated. Whether that occupant became "a tenant" was in issue. A person, undoubtedly a new tenant, took over possession of the premises from October 1980.

82. Priestly J.A. considered that if a repudiation by the tenant was accepted by the landlord then a surrender of the term would then have occurred by operation of law. Following such a surrender, the landlord has only a claim for damages for the breach. The landlord may, of course, decline to accept or simply refrain from accepting the repudiation. Until the landlord accepts the repudiation, the lease remains on foot.

83. In Wood Factory, the tenant, by failing to pay rent, vacating the premises and inviting the landlord to find another tenant, had, in his Honour's opinion, repudiated the lease. The landlord did not, however, accept that repudiation either by delivering a notice of intention to re-enter. Indeed the landlord's action for arrears of rent, commenced after service of the notice of intention to re-enter, would indicate the contrary. Giving possession to a new tenant, however, did effect a termination of the lease. Thereafter, the tenant was liable for damages for loss of the value of the term but not for rent.

84. McHugh J.A. also considered whether a termination following acceptance of a repudiation of the lease agreement required notice as if for termination by re-entry. After noting that the exercise of the contractual power to terminate by re-entry or otherwise does require notice under s.129 of the Conveyancing Act 1919 (NSW), (a similar provision to that of s.1(1) of the Forfeiture of Leases Act) his Honour observed that that provision did not apply to a surrender of a lease whether that surrender arose from agreement or operation of law.

85. More recently, the relationship between contractually based notices relied on to terminate a lease and termination for breach of a fundamental term or by acceptance of repudiation was considered in Laurinda Pty Ltd v. Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623.

86. The lessor had covenanted to provide a lease document in registrable form. As in the present case, the lessee was in occupation pursuant to a written agreement conferring an equitable term of years. The lessee was desirous of selling its business. It requested the lessor to provide a registrable lease document on various occasions over a period of five months. It received various assurances, none of which were honoured. Finally, the lessee gave notice to complete purporting to make time of the essence for registration or delivery of a registrable lease document. It allowed 14 days to do so. By that notice the lessees purported to "reserve their (that is, lessee and guarantors) rights in respect of your client's default" in the event that the demand made by the notice was not complied with. Despite that notice, the lease document was not registered by the lessor nor was one made available for registration by the lessee. The lessee and the guarantors then purported to rescind the agreement. A declaration that the lease had been validly rescinded by the lessee was made at the first instance. That order was set aside and reversed on appeal to the Supreme Court of Queensland. That decision itself was reversed on appeal to the High Court which restored the original result.

87. All Justices agreed that, by its conduct, the lessor had wrongfully repudiated the agreement. Four Justices considered, nevertheless, that the notice to complete was bad. Gaudron J. did not find it necessary to decide that question but did not express a contrary view. As to the correlation between the invalid notice and the default in performance constituting repudiatory conduct, Brennan J. noted

(644) "...if, the stipulated reasonable time having elapsed, a
notice to complete allowing a further reasonable time is given, a
failure to comply provides a firm foundation for an inference of
repudiation."

It follows, in his Honour's opinion, that such notice, although insufficient as a notice to complete, should be viewed as

"... a step towards lifting an equitable restraint on the exercise
of a right to rescind which arises aliunde."

88. In Laurinda, it was not the subjective intention of the lessor to bring the lease agreement to an end. It did desire to keep the lease on foot. That did not prevent its conduct being characterised as "repudiation". His Honour defined "repudiation" in the following terms

(647) "Repudiation is not ascertained by an enquiry into the
subjective state of mind of the party in default, it is to be found in
the conduct, whether verbal or other, of the party in default which
conveys to the other party the defaulting party's inability to perform
the contract or promise or his intention not to perform it or to
fulfill it only in a manner substantially inconsistent with his
obligations and not in any other way."

89. If a tenant gives notice of intention to vacate, a landlord is entitled to assume that the tenant is repudiating the lease. That was accepted in Charmar Electrical Pty Ltd v. Minda Incorporated (1990) 55 SASR 112. The landlord was, consequentially, entitled to damages for the loss of the remainder of the term.

90. In the present case, the lessee had acted so as to lead the lessor reasonably to conclude it had abandoned the premises. A question then arises as to whether the terms of the agreement preclude the plaintiff from relying on that apparent abandonment of the premises and then, whether the conduct of the defendant, as it explains it, is so to be characterised. In other words, would the acceptance of the defendant's explanation for its conduct give rise to an arguable defence.

The agreement - does it preclude reliance on repudiatory conduct?
91. Clause 15.04 is, if read literally, nonsensical. It seems to me that words have been omitted from the preamble to it. It should read to the effect, "It is a breach of a fundamental and essential term of this Lease if the Lessee shall be in default...". However, nothing turns on this. The intended meaning is plain enough. A similar omission had occurred in Ex parte Whelan (supra). As Thomas J. noted in that case, at p 502, Fitzgerald v. Masters [1956] HCA 53; (1965) 95 CLR 420, 426-7 is authority for the view that words may be supplied or omitted where that action is required to avoid absurdity or inconsistency.

92. Clause 15.08 is not activated unless a "default of the Lessee" has been validly relied upon to determine the "Term hereof". Part of the required procedure is a valid notice to remedy the default which has not then been complied with.

93. The agreement will be satisfied either by a statutory notice (s.1(1) Forfeiture of Leases Act) or, if no statute prescribes a notice, a notice pursuant to cl.15.06 itself.

94. The agreement, if no more was expressed, would be silent on the consequence of acts of repudiation arising aliunde. However, as cl.15.08 preserves recourse to other rights, it would be unlikely that reliance on express or implicit repudiation is precluded.

95. Clause 15.09, however, puts the issue beyond doubt. It provides

15.09.1 "In the event that the Lessee's conduct
(whether acts or omissions) constitutes a repudiation of the Lease (or
of the Lessee's obligations under the Lease) or constitutes a breach of
any covenants, the Lessee covenants to compensate the Lessor for the
loss or damage suffered by reason of the repudiation or breach.
15.09.2
The Lessor shall be entitled to recover
damages against the Lessee in respect of repudiation or breach of
covenant for the damage suffered by the Lessor during the entire term
of this Lease.
15.09.3
The Lessor's entitlement to recover
damages shall not be affected or limited by any one of the following:
(a) if the Lessee shall abandon or vacate the leased premises;
(b) if the Lessor shall elect to re-enter or to terminate the Lease;
(c) if the parties conduct shall constitute a surrender by operation
of law
15.09.4
The Lessor shall be entitled to
institute legal proceedings claiming damages against the Lessee in
respect of the entire lease term, including the periods before and
after the Lessee has vacated the leased premises, and before and after
the abandonment, termination, repudiation, acceptance of repudiation or
surrender by operation of law referred to in paragraph 15.09.3 whether
the proceedings are instituted either before or after such conduct."

The other rights and remedies set out in the remainder of cl.15.09 do not seem to be presently relevant.

96. It seems to me that cl.15.09 is intended to ensure that the principles affirmed in The Progressive Mailing House Pty Ltd v. Tabali Pty Ltd (supra) are applied. I would add, although it is not, perhaps, necessary so to find, that cl.15.09.1 seems intended to apply to the category of repudiation or breach of a fundamental term referred to in that case. Of course, since the lease agreement in this matter was executed, Laurinda Pty Ltd v. Capalaba Park Shopping Centre Pty Ltd (supra) clarified and extended the principles referred to therein.

97. As I have observed, the conduct of the defendant in this case was such as reasonably to induce the plaintiff to believe that the defendant had abandoned the premises and so repudiated the lease agreement.

98. Brennan J. observed in Laurinda Pty Ltd v. Capalaba Park Shopping Centre Pty Ltd (supra), that it is the objective character of the defendant's conduct which is relevant. The facts of this case are such, in my opinion, as to justify the action by the plaintiff in terminating the lease agreement. That is a characterisation of the external appearance of those facts. It is necessary to consider whether the possible subjective intention of the defendant to the contrary is a matter upon which the defendant may lawfully rely.

Estoppel
99. It would be inequitable to permit the defendant to rely on its subjective intent to re-occupy if, by its conduct, it has led the plaintiff to believe that it was abandoning the premises. This is an application of the principles accepted by the High Court in Sargent v. ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634 and Waltons Stores (Interstate) Ltd v. Maher [1988] HCA 7; (1988) 164 CLR 387.

100. The defendant's conduct in closing during normal hours would not, by itself, have evinced an intention to abandon the premises.

101. The removal of stock was consistent with abandonment of the premises but, even though the security guard, Mr Warren, was not a proper channel for communication with the defendant, he admittedly was told, and, in fact, passed on to the plaintiff, the information that the defendant had asserted that the stock removal was temporary. That would follow even more strongly if what the guard was told (and thus communicated) was the version attested to by Mrs Calvin. In that case, it might, at least arguably, be thought that the defendant had asserted its intention to renovate the premises.

102. However, the matter did not end there. Enquiries were made as to the defendant's intentions. Whether the defendant's solicitor responded that he had instructions not to give any information or no instructions to give information, the plaintiff was left equally in ignorance of the defendant's true intentions. Had the intention been as indicated by Mrs Calvin to Mr Warren, the plaintiff was entitled to wonder why, after, at least, an opportunity to obtain instructions, the defendant or its solicitor did not confirm or explain those intentions. The vacation of the premises occurred on 15 June 1992. The conversation with the defendant's solicitor was on 22 June 1992. The notice under the Forfeiture of Leases Act was affixed and delivered on that day.

103. It might well be thought that nothing would be more likely to cause the defendant to hasten to reassure its landlord about its true intentions, if they were as it now asserts, than the receipt of such a notice.

104. A response was written to it by the defendant on 29 June 1992. It follows that the defendant cannot claim it did not receive the notice. It obviously understood it.

105. In its response, the defendant chose to be uninformative. It's solicitor said, undoubtedly on instructions, "... our client does not regard itself as being in breach". Otherwise, it failed to communicate anything of what it now asserts were its true intentions to the plaintiff.

106. It was only on 16 July 1992, after re-entry, that the defendant's solicitors, for the first time, informed the plaintiff's solicitors that "our client previously informed the security guard of the premises that our client would be renovating and refurbishing the premises".

107. By inference, the defendant was then, for the first time, asserting that such was its intention in closing the shop.

108. Of course, even if Mrs Calvin's version of the statement given to Mr Warren was to be accepted, the information given to Mr Warren was not as informative as that.

109. The letter went on, rather than seeking retrospectively to regularise the situation, to assert "... your client's action has already left a stigma on the premises which would have adverse reaction upon customers of our client". This assertion was a prelude to the defendant purporting to accept "the repudiation of the tenancy by your client". That assertion was transparent nonsense. It is, in fact, contrary to the assertion Mr Khedoori and Mrs Calvin now make in their affidavits. The defendant intended to close the business known as "Adazz". It asserts that it intended to give the impression that a new and apparently unrelated fashion shop, "Harts", was to commence business. There could be no "stigma" and no possible "adverse reaction" that would conceivably attach to that apparently new business. It follows that, if those statements concerning an intention to open the apparently new business are true, the statements in the letter of 16 July 1992 concerning the ill-effects of resuming occupation were false and, undoubtedly, deliberately so. It is no wonder that the plaintiff's solicitors rejected the assertion of an intention to refurbish and re-occupy as a "fabrication".

110. Nevertheless, even if that was the defendant's intention, it follows that the defendant had so seriously deceived and misled the plaintiff as to that intention, that only one of two inferences are open.

111. The first is that the current assertion is a fabrication adopted merely to raise the colour of a defence to the action now taken by the plaintiff. For the purposes of this application, I assume that inference is not to be drawn. The second inference is that the defendant's most recent assertion is true but it deliberately chose to conceal its plans from the plaintiff. It went to some lengths and engaged in apparently deliberate deceit in its efforts to do so.

112. That the defendant should choose to conceal its true intentions is the more puzzling in the light of Mrs Calvin's assertion that she had prepared but, by oversight, failed to display a sign asserting that "Harts" would soon open. If passers-by were to be given at least some information why would not the plaintiff also have been told? What would the defendant have said of such a sign had it been displayed? Would it have denied any knowledge of the sign? That issue does not arise.

113. It is sufficient to conclude that it would be inequitable to permit the defendant now to resile from the consequences of the false impression it deliberately created.

114. The plaintiff clearly acted in reliance on the impression created by the defendant's conduct in acting to secure possession of the premises for reletting.

115. It follows that there was a valid determination of the lease by re-entry on 7 July 1992. The defendant cannot be heard to assert the contrary.

Damages
116. The only question remaining is as to the relief to which the plaintiff is now entitled. The defendant contends that payment of all rents and other sums due under the lease until its expiry would be a penalty. The plaintiff contends that cl.15.08 entitles it to judgment for the rentals reserved but unpaid for the remainder of the "Term" of the lease unless and to the extent that the defendant shows that rents have been or are likely to be received from an alternative lessee.

117. The agreement does not provide for an unqualified right to all sums due or likely to become due for the balance of the term. It allows for a credit by reference to the value of the chance (or the certainty) of re-letting the premises.

118. In my opinion, this clause is not applicable. If that view is right, then damages in this case fall to be assessed pursuant to cl.15.09. That clause sets out a methodology consistent with the common law rather than the more penal consequences specified by cl.15.08.

119. There are other reasons for doubting the application of cl.15.08. It is expressed to apply in the event of determination of the "Term". There is an initial question as to whether the determination of the lease by re-entry, the lessor's first option on breach (cl.15.06.1) is additional to or an alternative to the provisions of cl.15.08. The latter clause applies if (and, hence, only if) the lessor has determined "the Term hereof" by reason of the breach in question. The question is whether cl.15.08 applies if the lessor has determined the "Lease" as opposed to the "Term" and whether those two different expressions are intended to refer to different things.

120. The Deed of Agreement defines the term "Lease" as "the sublease annexed hereto". "Term" is referred to in cl.2.5 of the Deed in the context of the period of time reserved by the Lease for which the lessee may occupy the premises. The annexed sublease uses the expression, in the Reference Schedule, "Term of Lease". That is said to be "six (6) years". The Memorandum of Lease Provisions refers to "the Term hereof" in the definition of "LEASE YEAR". It appears in cl.2.05 thereof under the heading "DURATION OF COVENANTS". The effect of that latter clause is to continue the effect of the provisions of the Lease not exhausted at the expiration of "the Term hereof". The provisions of an agreement, once a repudiation of it was accepted would, ordinarily, cease to enure to the benefit of the repudiating party leaving the party in default to pay damages in lieu.

121. It seems to be clear from the context of cl.15.08 that the determination or ending of the "Term" is intended to refer to an ending of the right to occupy the premises for the six year period reserved but not to end the other terms and conditions of the agreement insofar as they have any continuing application after the happening of that event.

122. However, I do not think that cl.15.08 is applicable to the situat ion which arose in this case.

123. It is apparent that cl.15.09 does have direct application to the present circumstances. It expressly provides that the rights which it confers are not "affected or limited" by re-entry by the lessor.

124. It follows, I think, that the plaintiff is not precluded from recovering damages for its lost bargain in conformity with the principles adopted by the High Court in The Commonwealth v. Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64. However, it is not entitled, without proof of loss, to the entire revenue it would have received but for the premature determination of the lease. It does not follow that I am persuaded that cl.15.08 permits judgment for the entire revenue foregone even if it was applicable. It seems to me that cl.15.08 merely facilitates proof of the damage suffered by the lessor. It was not intended to create a debt equal to the remaining rental revenue reserved but unpaid. If it did so provide, it seems to me it would be a penalty against which equity would, in any event, grant relief (see, for example, Amev Finance Ltd v. Artes Studios Thoroughbreds Pty Ltd (1989) 15 NSWLR 564). It is appropriate to incline against such a construction accordingly. Thus, whether cl.15.09 applies, as I think it does, or cl.15.08, the plaintiff is entitled to judgment upon its claim but only for damages to be assessed. Indeed, although it asserts an entitlement to $132,703.64, the statement of claim itself asserts "loss and damage" in consequence of the breach by the defendant of the sublease.

125. The statement of claim is, however, defective as it does not assert that the plaintiff terminated the lease in question by re-entry. No point was taken as to this and it can, quite readily, be cured by amendment.

126. Subject to that being attended to, I propose to order that the plaintiff be at liberty to enter interlocutory judgment against the defendant for damages to be assessed.

127. I will hear the parties as to costs.