Court of Appeal

Grepo & Anor v Jam-Cal Bundaberg Pty Ltd [2015] QCA 131 (14/6131) Holmes and Morrison JJA and Douglas J 17 July 2015

Full-text: QCA15-131.pdf

Catchwords

LANDLORD AND TENANT – RENT – PROVISIONS AS TO RENT IN AGREEMENT FOR LEASE OR LEASE – RENT REVIEW CLAUSES – where the lease provided for rent review after the first year, either by way of market review or review based on the consumer price index – where the lessee paid rent at the base rate for the whole of the three year term – where the lessor argued that the lessee was required to calculate the rent payable in accordance with the consumer price index – where the lessee argued that the obligation to pay any increase was dependent on a determination being made by the lessors – whether the terms of the lease required a determination to be made – whether the trial judge erred in failing to find that the lessee was in breach of its obligation to pay rent

LANDLORD AND TENANT – COVENANTS – OTHER COVENANTS – where the lease prohibited the accumulation of rubbish on the premises – where the lessors argued that there was photographic evidence of an unacceptable accumulation of tyres – where there was no evidence as to when the photographs were taken – whether the trial judge erred in failing to find that the lessee was in breach of the lease

LANDLORD AND TENANT – COVENANTS – NOT TO ASSIGN OR SUBLET – LESSOR’S CONSENT – where the lease prohibited the lessee from underletting the premises without the lessors’ prior consent – where the permitted use of the premises was as a wrecking business – where the lessee rented a granny flat which was part of the premises to an employee without the lessors’ permission – where the lessee argued that the tenant was a caretaker and that his occupation of the flat was ancillary to the permitted use of the premises – whether the trial judge erred in failing to find that the lessee’s underletting of the premises was in breach of the lease

LANDLORD AND TENANT – COVENANTS – OTHER COVENANTS – where the lease required the tenant to keep the premises free and clear of rodents, termites, cockroaches and vermin – where a pest inspector found active termites in parts of the premises – where the lessee had not undertaken any termite treatment during the term of the lease – where the trial judge construed the obligation under the lease as an obligation to address any evident termite problem – whether the trial judge erred in construing the obligation – whether the trial judge erred in failing to find that the lessee was in breach of the lease

LANDLORD AND TENANT – RENEWALS AND OPTIONS – EXERCISE OF OPTION – RELIEF AGAINST LOSS OF OPTION FOR RENEWAL – where the lessee gave notice of its intention to exercise an option to renew – where the lessor did not give notice of the lessee’s breaches under s 128 of the Property Law Act 1974 (Qld) – where the lessee argued that the protective effect of the section endured for the entire term of the lease – where the lessor argued that the section did not apply after the lessee purported to exercise the option by giving notice – whether the purported exercise of the option to renew for the purposes of s 128 occurred at the time of the giving of notice, or at the expiration of the lease – whether s 128 applied to the lessee’s breaches which occurred after the giving of notice but before the expiration of the term of the lease

LANDLORD AND TENANT – RENEWALS AND OPTIONS – NATURE OF OPTION – where the lessee argued that the giving of notice of intention to exercise the option to renew created an agreement for a lease, entitling it to seek relief from forfeiture under s 124 of the Property Law Act 1974 (Qld) – where the lessor argued that the option to renew was an irrevocable offer with conditions precedent to its acceptance, namely the giving of notice and compliance with obligations under the lease – where the lessee argued that the conditions precedent were not met and there was no entitlement to a lease, and no entitlement to seek relief from forfeiture – where there were breaches of covenants up to and at the date of the lease’s expiry – whether there was an agreement for a lease – whether the lessee could claim relief from forfeiture under s 124 of the Property Law Act 1974 (Qld)

Summary Notes

General Civil Appeal – Leases – where the appellant lessors appealed a judgment dismissing their claim for recovery of possession of premises leased to the respondent – where the lease in question was of land adjacent to the lessors’ own residence – where the lease provided for rent review after the first year, either by way of market review or review based on the consumer price index – where the lessee paid rent at the base rate for the whole of the three year term – where the lessor argued that the lessee was required to calculate the rent payable in accordance with the consumer price index – where the lessee argued that the obligation to pay any increase was dependent on a determination being made by the lessors – whether the terms of the lease required a determination to be made – whether the trial judge erred in failing to find that the lessee was in breach of its obligation to pay rent – where neither party purported to have reached any determination of rent payable under that provision, so that cl 3.4 provided for payment of rent in the interim at the existing rate – where the lessee’s continued payment of rent at that rate was not in breach of the relevant covenant – where the lease prohibited the accumulation of rubbish on the premises – where the lessors argued that there was photographic evidence of an unacceptable accumulation of tyres – where there was no evidence as to when the photographs were taken – whether the trial judge erred in failing to find that the lessee was in breach of the lease – where the lease prohibited the lessee from underletting the premises without the lessors’ prior consent – where the permitted use of the premises was as a wrecking business – where the lessee rented a granny flat which was part of the premises to an employee without the lessors’ permission – where the lessee argued that the tenant was a caretaker and that his occupation of the flat was ancillary to the permitted use of the premises – whether the trial judge erred in failing to find that the lessee’s underletting of the premises was in breach of the lease – where the arrangement with the employee could not properly be regarded as anything but an underletting which went beyond the permitted use of the premises, regardless of whether the lessee was a company – where the failure to seek written consent for the underletting amounted to a breach of the covenant in cl 9 – where the lease required the tenant to keep the premises free and clear of rodents, termites, cockroaches and vermin – where a pest inspector found active termites in parts of the premises – where the lessee had not undertaken any termite treatment during the term of the lease – where the trial judge construed the obligation under the lease as an obligation to address any evident termite problem – where the lessee gave notice of its intention to exercise an option to renew – where the lessor did not give notice of the lessee’s breaches under s 128 of the Property Law Act 1974 (Qld) – where the lessee argued that the protective effect of the section endured for the entire term of the lease – where the lessor argued that the section did not apply after the lessee purported to exercise the option by giving notice – whether the purported exercise of the option to renew for the purposes of s 128 occurred at the time of the giving of notice, or at the expiration of the lease – whether s 128 applied to the lessee’s breaches which occurred after the giving of notice but before the expiration of the term of the lease – where the Queensland provision is based on the New South Wales section; so Windeyer J’s observations about the significance of the use of the expression “purported exercise” in Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1957) 76 WN (NSW) 72, and the fact that the problem thrown up by that case related to pre-notice breaches, are apposite – where, as in New South Wales, it seems probable that most practitioners in this State would regard the lessee’s purported exercise of an option as the act of giving notice, not the combination of that act and the passage of the rest of the term without breach – where s 128(9) points away from the view that the purported exercise of an option conditional on an absence of breach at the end of the existing term takes place when the term ends – where it deals with instances in which the lease expires shortly after the exercise of the option or soon after the serving of the lessor’s notice under s128(4), and is clearly designed to cater for any hiatus – where in the present case the terms of cl 17, and the fact that there were breaches of covenants in this lease up to and at the date of its expiry, meant that the lessor was not obliged to grant a new lease – where cl 17 contained conditions precedent to acceptance of the offer: that notice be given at least six months before the existing lease’s end, which was met, and that it comply with the lease’s covenants up until that time, which was not met, so that the offer was not accepted – where there was consequently, no agreement for lease within the terms of the definition in s 123, and s 124 was not enlivened – where it is concluded that the lessee was not entitled to exercise the option because of its breaches of covenants after the giving of notice of exercise, to which s 128 did not apply – where no agreement for a lease to which the lessee was entitled came into existence, so that s 124 did not apply to allow relief against forfeiture where the lease ended on 13 May 2013; thereafter the lessee remained, while the lessors consented, on a monthly tenancy under the holding over clause in the lease – where the lessors are entitled to possession. Appeal allowed. Judgment below set aside with judgment for the appellants for recovery of possession of specified premises. Costs.