Real Property Law – Remedies of landlord and tenant in a contract – Lessee’s breaches of covenants – Unregistered lease – Terminate of leases
Facts; A factory premises comprised a land registered under the Real Property Act 1900 (NSW). The memorandum of lease, was a registrable form and the appellant was a lessee and did not register the memorandum of lease and opted to create a five-year lease commencing on 4 December 1978.
Part 10 of the memorandum of lease contained a clause 10.1, with the heading of “default, termination etc” and provided in the event that:
(a) Any rent or any other money payable under this lease, shall remain unpaid for fourteen (14) days, next after the date appointed for payment thereof; or
(b) The lessee being a company, an order is made or a resolution is effectively passed for the winding up of the lessee or cease to carry on a business; or
(c) The lessee fails to perform or observe any one or more of the covenants or provisions on the part of the lessee expressed or implied in this lease, and the lessee fails to remedy after thirty (30) days’ of notice, and if there is no performance by the lessor, then the lessee’s excuse is waived.
The appellant did not pay rent for a period of two months at the commencement of the lease, as well as in May to October 1978. In addition, the appellant committed a number of breaches that include – damage to the property, failing to rectify the said damage and subletting the premises to another party without the lessor’s consent.
The respondent commenced proceedings by way of a Statement of Claim at the Supreme Court of New South Wales, seeking for an Order for possession, judgment for outstanding rent and interest monies, mesne profits and damages. The primary judge awarded damages to the lessor for the loss of the covenants to pay rent but nothing additional and the respondent appealed to the New South Wales Court of Appeal, but the Court of Appeal dismissed the matter. The respondent then proceeded to appeal to the High Court of Australia.
Issue: Could the lease be terminated for a number of breaches?
Holding: Joint judgment by Mason, Brennan and Deane JJ, held that the appellant was in breach of multiple covenant’s to pay for rent and to maintain and repair the damages that had not been rectified. The justices rejected the appellant’s case for relief against forfeiture by observing that the breach of the covenant to pay the rent, was in respect of a substantial amount and had been persisted in over a long period. Moreover, Mason J found that that in various respects the appellant’s breaches of the covenant to maintain and repair, and the covenant against subletting had shown a disregard on the part of the appellant for the premises and for the respondent’s interest in them. Mason J picked up on the third category “a party evinces is no longer bound by the court… substantially inconsistent with the contract”. This type of renunciation, can be shown by past conduct or many breaches that amount to fundamental breaches.
Brennan J, went onto assert that the lessee’s breaches of the covenant are said to show an intention to act and to act only, in a manner substantially inconsistent with his obligations under the lease. The lessee did show such an intention and that the lessee repudiated the contract embodied in the lease. Thus, amounted to “renunciation” and renunciation can also be anticipatory conduct; whereby Tabali showing conduct that will not meet future obligations.
Today, we look and follow the principle in this case. This case is applicable in matters of extreme or serious breaches of a lease.