Sarker v World Best Holdings Ltd (No 2) [2004] NSWADT 15 (28 January 2004)

Last Updated: 11 October 2004

NEW SOUTH WALES ADMINISTRATIVE DECISIONS TRIBUNAL RETAIL LEASES DIVISION

CITATION: Sarker v World Best Holdings Ltd (No 2) [2004] NSWADT 15


PARTIES: APPLICANT
Abul Sarker
RESPONDENT
World Best Holdings Limited



FILE NUMBERS: 035087

HEARING DATES: 19/01/2004-20/01/2004

SUBMISSIONS CLOSED: 20/01/2004



DECISION DATE: 28/01/2004

BEFORE: Chesterman M - ADCJ (Deputy President)Fagg N - MemberGriffiths G - Member





LEGISLATION CITED: Conveyancing Act 1919
Retail Leases Act 1994

CASES CITED: Marshall v Council of the Shire of Snowy River (1994) Butterworths Property Reports 14,447
Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17
Rawson v Hobbs [1961] HCA 72; (1961) 107 CLR 466
Shepherd v Felt & Textiles of Australia Ltd [1931] HCA 21; (1931) 45 CLR 359
Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620
Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105

APPLICATION: Validity of notices purporting to terminate lease

MATTER FOR DECISION: Preliminary matter


APPLICANT REPRESENTATIVE: APPLICANT
M Ashhurst, barrister

RESPONDENT REPRESENTATIVE: RESPONDENT
M Ellicott, barrister

ORDERS: Dismiss the Applicant’s claim for a declaration that the Respondent’s notices, dated respectively 25 July 2003 and 14 November 2003, terminating the Lease to the Applicant were invalid as a matter of law.


Reasons for Decision:

Introduction

1 These reasons for judgment relate to a specific issue which, in circumstances outlined below, has been argued by the parties in a preliminary hearing.

2 In this case, the Applicant Lessee, Abul Sarker, initially sought relief on 31 July 2003 in the Supreme Court against the Respondent Lessor, World Best Holdings Ltd.

3 The Applicant instigated the Supreme Court proceedings following the Respondent’s alleged conduct in (a) serving upon him, through its solicitors, a notice dated 25 July 2003 (‘the First Notice of Termination’) purporting to terminate an alleged lease to him (‘the Lease’) of premises at Shop 48B, Minto Mall Shopping Centre (‘the premises’), and (b) taking steps shortly thereafter to exclude him from possession of these premises. According to a lease document, dated 27 June 2003, that has been admitted into evidence on a restricted basis in these proceedings, the Lease commenced on 1 July 2003 and was for a term of three years. The Applicant actually entered into possession on a date in June.

4 On 31 July 2003, pursuant to a Notice of Motion of the same date, Windeyer J in the Supreme Court made orders requiring the Respondent to restore the Applicant to possession of the premises, restraining the Respondent from further interfering with his possession of the premises until further order and transferring the proceedings to this Tribunal.

5 In addition to claiming an order restoring him to possession, the Applicant’s Summons in the Supreme Court sought declarations (a) that the First Notice of Termination was invalid; (b) that the Respondent had re-entered the premises in breach of s 129 of the Conveyancing Act 1919 and (c) that the Respondent had repudiated the Lease. The Applicant also claimed damages for the loss suffered as a result of this repudiation and, in the alternative, relief against forfeiture.

6 In the period since the proceedings were transferred, the Tribunal has heard and determined two applications for urgent interim orders filed by the Applicant and one such application filed by the Respondent. It is not necessary for us here to describe the nature or outcomes of these applications.

7 In addition, the Respondent has filed an application in the nature of a cross-claim (file no. 035100), comprising both a retail tenancy claim and a claim of unconscionable conduct. For present purposes, the important matter to note in relation to this application is that it sought, amongst other forms of relief, declarations (a) that the Respondent had validly terminated the Lease, either by the First Notice of Termination or by a second notice, dated 14 November 2003, purporting to do this (‘the Second Notice of Termination’) and (b) that the Respondent was not obliged to serve a notice under s 129(1) of the Conveyancing Act for breach of covenants prior to serving either Notice of Termination.

The events leading to an order for a separate hearing

8 The trial of the matters raised in both the original application and the Respondent’s application by way of cross-claim was set down for hearing before us on 19 and 20 January 2004. Early on the first day, however, Mr Ellicott, counsel for the Respondent, applied for the hearing to be vacated and new dates for a hearing to be set. The principal ground of his application was that a lengthy affidavit of the Applicant, required by the Tribunal’s directions to be filed and served by 5 December 2003, had not been served until 12 January 2004 and that his client would therefore be prejudiced through not having had sufficient time to prepare evidence in reply.

9 Mr Ashhurst, counsel for the Applicant, sought rulings to the effect that the trial of issues relating to the liabilities of the parties could and should proceed without delay and that the issues raised by his client’s claim for damages could be deferred to a subsequent hearing. He pointed out that the subsequent hearing might prove unnecessary in the light of the Tribunal’s conclusions on liability and that postponement of this part of the trial would also give time to his instructing solicitors to file evidence (if they thought fit) in reply to an expert report that had been filed late by the Respondent. Mr Ashhurst claimed also that the affidavit of the Applicant that had been served out of time dealt only with matters relating to damages.

10 In response, Mr Ellicott contended that the statements made in the affidavit did, in part, relate to liability. He submitted also that it would be improper for us to reach conclusions on liability after having (amongst other things) been required to form opinions as to the credibility of the principal witnesses on both sides, given that subsequently we might be conducting a subsequent hearing on damages in which one or more of these witnesses were again cross-examined. The result – an undesirable one, in his submission – might well be that in the subsequent hearing we would feel bound to revise our initial assessments of their credibility.

11 We indicated that we were inclined to accept the arguments put by Mr Ellicott and to grant an adjournment. We also made it clear that we had formed this view with reluctance, as we considered it most unfortunate that there should be further delay in the resolution of these already protracted proceedings. We observe now that if late service by either party of any of the remaining evidence prompts a justifiable claim by the other party that its reception would cause prejudice, we will give close consideration to making an order that the evidence should not be admitted.

12 Mr Ashhurst then applied for a ruling that one specific issue arising in the case could be separated from the other issues to be resolved and addressed during the two days (19 and 20 January) that had been set down for the trial of the matter. This concerned the validity in law of each of the First and the Second Notices of Termination. Mr Ashhurst applied for, and was granted, leave to amend the Applicant’s Summons so as to include in it a claim for a declaration that the Second Notice, as well as the First Notice, was invalid.

13 Mr Ellicott opposed the application for a separate hearing. He argued that it would not necessarily save time and that on account of the inherent difficulties of defining a specific issue for separate resolution it might well give rise to significant problems.

14 We considered, however, that the issue formulated by Mr Ashhurst could be severed from the other issues to be determined and could usefully be resolved in a separate hearing. We were concerned that the trial of this whole matter should be brought to a close as speedily as possible and that some worthwhile use should be made of the time that had been set aside for hearing it. We accordingly ordered that a separate hearing should take place.

The terms on which the separate hearing has been conducted

15 The issue to be resolved in this hearing (‘the separate question’) was formulated in these terms: whether each of the Notices of Termination issued by the Respondent on 25 July 2003 and 14 November 2003 was valid as a matter of law. The first form of relief sought by the Applicant in his Summons (amended as noted in [12] above) is indeed that the Notices should be declared invalid as a matter of law.

16 At the commencement of the separate hearing, Mr Ellicott submitted that there should be an order by the Tribunal stipulating that a number of conditions, which he described as ‘Bases of Argument’, should apply to the hearing. He handed up a document containing a draft of these conditions. After hearing argument, we decided that, in order to delineate properly the scope of the separate hearing, we should make an order which, with some amendments, followed the text of this draft.

17 We accordingly ordered that the ‘Bases of Argument’ for the determination of the separate question should be as follows:-

The Applicant will make no submission or objection on the basis that the Respondent has led no evidence on the separate question either before this Tribunal or on any appeal from its decision.

The determination of the separate question will not bar the Respondent from leading any evidence of breach or other conduct of the Applicant at any adjourned hearing of these proceedings.

The determination of this separate question does not bar the Respondent from asserting in any adjourned hearing that no lease exists or that, by virtue of either or both of the Notices of Termination coupled with other conduct on its part, it exercised a common law right of termination by accepting the repudiatory conduct of the Applicant which it alleges exists.

The lease document dated 27 June 2003 is admitted on this separate issue hearing only for the purposes of clarifying the terms of the letters of termination and by consenting to its admission the respondent reserves its right to submit that it is not a valid lease or that no lease existed in these proceedings and to object to its tender on any proper basis at any adjourned hearing of these proceedings.

The Applicant’s arguments

18 The core of Mr Ashhurst’s argument on behalf of the Applicant was as follows. The method of termination of the Lease adopted by the Respondent in each of its two Notices of Termination fell within a category judicially defined as ‘determination resulting from the operation of or reliance upon the terms of the lease’. This is evident from the words used in each of the Notices, when read in conjunction with relevant clauses of the Lease. When this method of determination is invoked by a lessor, the requirements of s 129(1) of the Conveyancing Act 1919 must be observed. As the terms of the Notices make clear, these requirements were not observed. It follows therefore, as a matter of law, that both of the Notices were invalid.

19 The authority on which Mr Ashhurst relied in describing the method of termination adopted by the Respondent was a passage in the judgment of Priestley JA in Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105 at 120-121. In this passage, his Honour classified under six headings the methods of determination of a lease. He defined the second of these as follows:-

... determination arising from the operation of or reliance upon the terms of the lease itself – effluxion of time, notice to quit, exercise of an option to determine, operation of a condition subsequent, forfeiture...

20 Another of Priestley JA’s six categories is of direct relevance to these proceedings. He described it as follows (at 121):

There is now what may be either a sixth way or a new species of surrender: acceptance by a landlord of a tenant’s repudiation of the lease or his breach of a fundamental term of the lease: Progressive Mailing House Pty Ltd v Tabali Pty Ltd [this case is reported at [1985] HCA 14; (1985) 157 CLR 17].

21 Both Notices of Termination were sent to the Applicant by Mr Phillip Biber, Solicitor for the Respondent. The First Notice, dated 25 July 2003, stated that although the Applicant had executed the document of lease dated 27 June 2003, the Respondent had not yet done so, but that by virtue of s 8 of the Retail Leases Act 1994, a lease might well be deemed to exist because the Applicant had taken possession of the premises. It went on to allege that the Applicant had breached a number of terms and conditions of the Lease.

22 Specifically, it alleged breaches by the Applicant of the following obligations: (i) under clauses 13 and 24.1, to provide a bank guarantee; (ii) under clause 20.2 (b), (c) and (e), to comply with certain requirements relating to the nature and quality of any works carried out in the premises by him; and (iii) under special condition 33.1, to fit out the premises in accordance with the ‘Minto Mall tenancy Fitout Guide’, using premium quality materials so as to ensure that the design and appearance of the fitout would be of the highest standard, and expending not less than $40,000.

23 The final sentence of the paragraph outlining the alleged breaches by the Applicant was in the follow terms:-

E. You have repudiated your obligations under the lease, in particular in relation to compliance with the Tenancy Fitout Guide, the quality of the fitout, the amount to be expended and provision of the bank guarantee.

24 The First Notice then concluded as follows:-

As a consequence of the foregoing and pursuant to clause 24.2 of the lease, I give you notice on behalf of WBH [the Respondent] that your lease of the shop premises dated 27 June 2003 is hereby terminated [emphasis in the original]. Kindly ensure that you remove all of your stock no later than 4.00 pm, Sunday, 27 July 2003, as my client intends to re-take possession of the shop premises immediately thereafter.

My client reserves all its rights with respect to recovery of damages by virtue of the several breaches of the lease and your wrongful repudiation of the lease.

25 The Second Notice of Termination, dated 14 November 2003, commenced by referring to the First Notice. It then outlined terms in the Lease relating to payment of rent (clauses 6.1, 24.1 and 29.1) and the carrying out of works on the premises (clause 20.1 and special condition 33.1). Next, it alleged breaches by the Applicant of clause 6.1 (the covenant to pay rent), clause 20.2 and special condition 33.1, and also that the Applicant was ‘trading in Indian groceries contrary to the permitted use’.

26 The Second Notice then concluded as follows:-

Once again, you have repudiated essential obligations under the lease as set out above. As a consequence and without prejudice to any prior termination rights of my client, pursuant to clause 24.2 of the lease, I hereby give you notice on behalf of World Best Holdings Limited that your lease of the shop premises dated 27 June 2003 is terminated.

My client reserves all its rights with respect to recovery of damages against you by virtue of the several breaches of essential terms of the lease and your wrongful repudiation of it.

27 Out of the provisions of the Lease mentioned in the two Notices of Termination, it is only necessary to quote two – clauses 24.1 and 24.2 – in the present context. These are as follows:-

24 Default

Essential terms

24.1 Each of Your obligations to pay money and Your obligations under clauses 13, 14, 16, 18, 20 (except under clauses 20.3 and 20.5) and 21 are essential terms of this lease. Other obligations under this lease may also be essential terms.

Our right to end this lease

24.2 We may end this lease by giving You notice or by re-entry if You:

(a) repudiate Your obligations under this lease

(b) do not comply with an essential term of this lease; or

(c) do not comply with an obligation under this lease (which is not an essential term) and, in Our reasonable opinion:

(i) the obligation can be remedied, but You do not remedy it within a reasonable time after We give You notice to remedy it;

(ii) the non-compliance cannot be remedied or compensated for; or

(iii) the non-compliance cannot be remedied but We can be compensated and You do not pay Us compensation for the breach within a reasonable time after We give You notice to pay it.

28 The relevant parts of s 129(1) of the Conveyancing Act are subsections (1) and (2):-

(1) A right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant, condition, or agreement (express or implied) in the lease, 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 case the lessor claims compensation in money for the breach, requiring the lessee to pay the same,

and the lessee fails within a reasonable time thereafter to remedy the breach, if it is capable of remedy, and where compensation in money is required to pay reasonable compensation to the satisfaction of the lessor for the breach.

(2) Where a lessor is proceeding by action or otherwise to enforce such a right of re-entry or forfeiture, or has re-entered without action the lessee may personally bring a suit and apply to the Court for relief; and 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, may grant or refuse relief, as it thinks fit; and in case of relief may grant the same 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.

29 As outlined above at [18], Mr Ashhurst’s argument was that the mode of termination adopted in each of the two Notices was, to quote again Priestley JA in Kiritos, ‘determination resulting from the operation of or reliance upon the terms of’ the Lease. This followed from the express references to clause 24.2. The consequence was that the Respondent was purporting to enforce a ‘right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant, condition, or agreement (express or implied) in the lease’ within the meaning of s 129(1) of the Conveyancing Act. This subsection expressly provided, however, that enforcement of such a right was not permitted without first serving a notice of the type prescribed by it. Such a notice had not been served.

30 In support of this argument, Mr Ashhurst cited a passage in the judgment of Meagher JA (with whom Kirby P and Powell JA agreed) in Marshall v Council of the Shire of Snowy River (1994) Butterworths Property Reports 14,447 at 14,457. This passage was also relied on by Mr Ellicott:-

An examination of the decision of the High Court of Australia in The Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17, particularly per Deane J at 55, demonstrates that, a lease being a contract, when one party to it repudiates it or commits a fundamental breach or a breach of one of its essential terms, the other party may "accept" the repudiation or breach and terminate the lease. In such a case, the lessor, presuming him (as in the present case) to be the innocent party, will have two rights: first, a contractual right to terminate the lease by re-entry for breach of covenant (in this case contained in cl 4 of the lease), and secondly on the application of ordinary principles of contract law to terminate for breach. If he relies on the former right, he must comply with s 129 of the Conveyancing Act before re-entering; if, as here, he relies on the latter right, s 129 becomes an irrelevance.

31 Mr Ashhurst argued that a notice of termination that had been served by the lessor Council in the Marshall case provided a good example of termination of a lease on the ground of a ‘fundamental breach’ at common law, as opposed to termination in reliance on the express terms of the lease. The relevant section of this notice, quoted in the report at 14,453, was as follows:-

(iv) such breaches of the Agreement aforesaid are regarded by the Council as a fundamental breach of the Agreement and a repudiation of the Agreement by you. NOW the Council HEREBY GIVES NOTICE that you are required to vacate and peaceably surrender possession of the property... to the Council or its representative by no later than [a specified date and time].

32 With reference to the phrases in the Notices of Termination alleging repudiation or ‘wrongful’ repudiation by the Applicant of obligations or ‘essential’ obligations set out in the Lease, Mr Ashhurst contended that these did not detract from the proposition that the method of termination used was that of termination in reliance on a clause – specifically, clause 24.2 – of the Lease. The use of the word ‘repudiation’ was, he said, explicable by reference to clause 24.2(a). Furthermore, the Notices did not state or imply that there had been any acceptance by the Respondent of the alleged repudiation.

33 Mr Ashhurst submitted also that the Respondent stood to gain certain benefits by terminating the Lease pursuant to clause 24.2 rather than by an allegation of conduct amounting to repudiation.

34 One such benefit, he said, was that it could rely on provisions in clauses 24.3 and 24.4 entitling it to claim an indemnity for any liability, loss or cost incurred in connection with the alleged breach or breaches by the Applicant and on re-entry to retain stock, plant or equipment of the Applicant as security for any amount owed to it.

35 A further benefit was that it was easier for the Respondent to claim a right to terminate under clause 24.2, on the ground of any breach or breaches falling within the terms of that clause, than a right to terminate on the ground of conduct that was sufficiently serious to constitute repudiation. The nature of this benefit was, he said, well illustrated by the High Court’s decision in Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620. Here, a number of breaches by the lessee of its obligation to pay rent at the due time, resulting in the lessee being two months in arrears, were held insufficiently serious to amount to repudiation.

36 Mr Ashhurst contended that in both of the Notices of Termination the Respondent conceded that a lease between the parties existed, whether by virtue of the document dated 25 July 2003 or under s 8 of the Retail Leases Act. If, however, the Respondent sought to deny the existence of a lease – as indeed it reserved the right to do in the ‘Bases of Argument’ that it had put forward for this separate hearing (see [17] above) – it necessarily followed that the Notices of Termination were invalid because they expressly invoked the terms of clause 24.2 of the Lease.

37 Finally, Mr Ashhurst presented arguments in response to some ancillary submissions made by Mr Ellicott. We will refer to these at appropriate points in the ensuing outline of Mr Ellicott’s case.

The Respondent’s arguments

38 Two preliminary contentions were advanced by Mr Ellicott. First, he pointed out that s 129(1) of the Conveyancing Act stated only that a right of re-entry or forfeiture was ‘not enforceable by action or otherwise’ if the prescribed notice was not served. The effect of non-compliance with the subsection was not, he said, that a notice of termination given by the lessor was invalid, but only that the lessor could not give effect to such a notice.

39 Secondly, he argued that (a) the relief against forfeiture provided to a lessee by s 129(2) could only be claimed in ‘the Court’ – which means, under s 7 of the Conveyancing Act, the Supreme Court – and (b) this subsection is necessarily linked with s 129(1). It followed, he claimed, that this Tribunal, having no jurisdiction to grant relief under s 129(2), also had no jurisdiction to give effect to the requirements of s 129(1).

40 The main argument put by Mr Ashhurst in response to these two contentions was that the true effect of s 129(1) was to render unenforceable any clause of a lease authorising termination if the prescribed notice was served. It must follow, he said, that a notice of termination given pursuant to such a clause would be invalid irrespective of whether the lessor sought to rely on it in the Supreme Court or in any other forum, such as this Tribunal.

41 We accept these arguments of Mr Ashhurst and reject both of the preliminary contentions put by Mr Ellicott.

42 A third preliminary submission by Mr Ellicott, as we understood it, was that the question whether a notice of termination was based on a contractual term or on conduct amounting to repudiation was necessarily a question of fact, not of law. It followed from this alone that the declaration sought by the Applicant was misconceived.

43 We turn now to Mr Ellicott’s principal submission on the issue to be resolved. This was that the following five well established propositions of contract law, when taken in conjunction with the final sentence of the passage quoted above (at [30]) from Meagher JA’s judgment in Marshall, necessarily operated to rebut Mr Ashhurst’s claim that the Notices were invalid as a matter of law.

44 The first proposition was that it is quite possible for a notice by a contracting party terminating the contract on account of one or more breaches by the other party to do so both under an express term providing for termination and on the ground that the other party’s conduct amounted to repudiation. As Mr Ashhurst in fact conceded during argument, there is no rule that the party serving such a notice must elect between these two modes of termination.

45 Secondly, any ground of termination that was valid at the time of the notice of termination can be relied upon as justification by the terminating party, even if this party did not refer to it in the notice (but referred instead to some other ground) or indeed was not aware of it at the time of giving the notice. In this connection, Mr Ellicott cited Shepherd v Felt & Textiles of Australia Ltd [1931] HCA 21; (1931) 45 CLR 359 at 377-378 and Carter, J W, Breach of Contract, 2nd edn, 1991 (hereafter ‘Carter’), [1006].

46 Thirdly, the presence of a contractual right to terminate is not generally treated by the courts as excluding a common law right, such as the right to terminate on the ground of conduct amounting to repudiation (Carter, [1014]).

47 Fourthly, where a contractual right to terminate does not exclude common law rights and the party purporting to terminate has sought inappropriately to rely on the contractual right, it may still be open to this party to claim that, providing the relevant grounds at common law exist, the notice that he or she has given is effective at common law.

48 In this connection, Mr Ellicott relied on the decision of the High Court in Rawson v Hobbs [1961] HCA 72; (1961) 107 CLR 466, cited in Carter at [1014]. Here the purchasers of a grazing property sought to rely on a contractual right to terminate, it having been made clear to them that a necessary ministerial consent to the transfer would not be forthcoming. It was not, however, open to them to invoke this contractual right, since its exercise was dependent on there having been an express refusal by the Minister. The High Court held that nonetheless the notice of termination could take effect, on the alternative common law ground that the vendors were evidently unable to perform their obligations under the contract. As explained by Dixon J at 480, the notice conveyed sufficiently conveyed the purchasers’ intention to treat the contract as ‘annulled or rescinded’.

49 Fifthly, there are no particular formalities associated with termination pursuant to a common law right, such as on the ground of conduct by the other party amounting to repudiation. It is sufficient, as Carter states at [1015], that there be ‘unequivocal words or conduct evincing an election to terminate the performance of the contract’. There is no need, according to Carter at [1016], to ‘state the basis for the election’. The party terminating ‘may say’, for instance, that the contract is ‘off’ or ‘at an end’ or that the other party’s breach ‘has been "accepted" as a repudiation of the contract’ (Carter at [1016]). In Mr Ellicott’s submission, Carter’s citing of this final example of a statement that the terminating party may make necessarily implies – in contradiction of a submission by Mr Ashhurst – that there is no rule that a party terminating on grounds of repudiatory conduct must indicate that the repudiation has been accepted.

50 With reference to the particular circumstances of this case, Mr Ellicott argued further that clause 24.2 of the Lease, on account of its express reference in subparagraph (a) to repudiation of the lessee’s obligations, could well be interpreted as setting out a mode of termination (i.e., by notice or re-entry) which would be available irrespective of whether the lessor relied on the common law ground of conduct amounting to repudiation or on a contractual ground. He submitted that if this interpretation were correct, the references to clause 24.2 in the Notices of Termination would not necessarily give rise to the implication, for which Mr Ashhurst contended, that the Respondent was invoking a contractual ground.

51 On the basis, primarily, of these five propositions of contract law, Mr Ellicott argued that the First Notice of Termination, or in the alternative the Second Notice, was adequate to terminate the Lease on the ground of repudiatory conduct by the Respondent, irrespective of whether it also purported to invoke a contractual ground of termination. Applying the principle stated by Meagher JA in Marshall at 14,457, s 129 of the Conveyancing Act was in this situation ‘an irrelevance’. This meant that it could not be said that either of the Notices was invalid as a matter of law.

52 As an ancillary argument, Mr Ellicott drew our attention to a statement in the judgment of Kirby P in Marshall v Council of the Shire of Snowy River ((1994) Butterworths Property Reports 14,447 at 14,454), to the effect that s 129 of the Conveyancing Act was not applicable in cases where the agreement for lease had not been registered and would not, on account of breaches by the lessee, be the subject of an order for specific performance. In this situation, the statement in s 128 that s 129 applied to an ‘agreement for a lease where the lessee has become entitled to have his lease granted’ would be of no avail to the lessee. Mr Ellicott claimed that this statement of principle was relevant because the Respondent maintained its denial that there was ever a lease between it and the Applicant.

53 In response to this line of argument, Mr Ashhurst contended, as mentioned above at [36], that the Respondent could not deny the existence of a lease while simultaneously claiming that the Notices of Termination were valid. He also asserted that the principles stated here by Kirby P were not relevant to the present issue and, moreover, that Kirby P was in the minority in the Marshall case, since Powell JA (at 14,457) had expressed agreement with the judgment of Meagher JA only, not with that of Kirby P.

The Tribunal’s conclusions

54 In our opinion, the propositions of contract law (outlined above at [43 – 49]) and the principle stated by Meagher JA in Marshall are correct and are sufficient to resolve in the Respondent’s favour the specific issue posed for determination in this separate hearing. Applied to the circumstances of this case, they produce, in our view, the following outcomes.

55 First, in the absence of a contrary indication either in clause 24.2 or elsewhere in the Lease, we should apply the normal presumption, stated above at [46], that the existence of an express contractual right to terminate a contract does not exclude common law rights of termination, such as termination on the ground of conduct amounting to repudiation.

56 It may well be, as argued by Mr Ellicott (see [50] above), that the wording of subparagraph (a) of clause 24.2 was in fact sufficient to indicate that termination on this common law ground, as well as on a contractual ground, was available to the Respondent in appropriate circumstances and could be effected in the manner set out in the clause. But we do not need to rule on this specific question.

57 Secondly, each of the two Notices of Termination could therefore, as a matter of law, effect termination on the ground of conduct of the Applicant amounting to repudiation, even though (a) according to their natural meaning they communicated an intention of terminating pursuant to the contractual right and (b) termination according to this mode was not open to the Respondent on account of non-compliance with s 129(1) of the Conveyancing Act. In this connection, we have found Rawson v Hobbs [1961] HCA 72; (1961) 107 CLR 466 (outlined above at [48]) to be a particularly helpful authority.

58 Thirdly, each of the Notices contained ‘unequivocal words... evincing an election to terminate the performance of the contract’ (see Carter at [1015] and [49] above). For that reason, each Notice was adequate to effect termination on the ground of conduct by the Applicant amounting to repudiation.

59 We note in passing that, if we had reached the contrary conclusion (i.e., that the Notices were not adequate in this regard), it would still have been open to the Respondent at the adjourned hearing to allege and prove conduct on its part which, taken in conjunction with either or both of the Notices, sufficiently conveyed its intention to terminate the lease on this ground. This follows from the statement in Carter, at [1015], that this intention may be evinced by conduct (whether or not accompanied by words). In the ‘Bases of Argument’ for this separate hearing (see [17] above), the Respondent’s right to make such an assertion at the adjourned hearing is expressly preserved.

60 Fourth and finally, the Notices, in so far as they purported to effect termination on this ground of repudiatory conduct, cannot be held invalid on account of the Respondent’s failure to comply with s 129(1) of the Conveyancing Act. This follows from the concluding words of Meagher JA’s statement of principle, quoted above at [30], in Marshall v Council of the Shire of Snowy River (1994) Butterworths Property Reports 14,447 at 14,457, although in some earlier authorities, the opposing view is to be found (see eg Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105 at 132, 144; Butt, P, ‘The contractualisation of leases: a further step?’ (1996) 70 ALJ 97 at 100).

61 It follows from this line of reasoning that there is no basis on which either of the two Notices of Termination, as a matter of law, can be held invalid.

62 We should add that this conclusion does not preclude the Applicant from contending at the adjourned hearing of this case that the Respondent was not entitled to serve either of the Notices of Termination because no breach or breaches providing grounds for termination had in fact been committed by the Applicant.

63 In this connection, Mr Ashhurst, in his submissions in reply, put to us the argument that, even if we were to reject his submission that the Notices were invalid as a matter of law, the principles and the authorities that had been put before us in the separate hearing nonetheless produced an outcome of significance for his client’s case. They had at least the effect, he maintained, of debarring the Respondent from arguing that proof of one or more breaches of specific clauses of the Lease – for example, special condition 33.1, relating to the cost and quality of the fitout – would of itself provide sufficient justification for serving the Notices of Termination without having complied with s 129(1). Only if the Respondent could prove at the adjourned hearing that the breach or breaches constituted repudiation could it claim that the Notices were valid and effective to terminate the Lease.

64 We take note of this contention, but at this stage will not give a ruling as to its correctness. It seems quite likely that the factual and legal aspects of this issue will have to be resolved at the adjourned hearing, in which event much of the debate between counsel at this preliminary hearing will almost certainly be relevant and useful.

65 Similarly, we will not rule upon Mr Ashhurst’s submission (see [36] above) that, at this separate hearing, it was not open to the Respondent to deny the existence of a lease while simultaneously claiming that the Notices of Termination were valid. We will say only that undoubtedly this argument has merit. But we note that in the ‘Bases of Argument’ for this separate hearing (see [17] above), the Respondent’s right to claim at the adjourned hearing that no valid lease existed is expressly preserved.

66 For these reasons, we dismiss the Applicant’s claim for a declaration that the Respondent’s notices, dated respectively 25 July 2003 and 14 November 2003, terminating the Lease to the Applicant were invalid as a matter of law.