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- Unreported Judgment
SUPREME COURT OF QUEENSLAND
Hookey & Anor v Whitelaw & Ors (No 3)  QSC 284
SCOTT GREGORY HOOKEY
KIDS ACADEMY HOPE ISLAND PTY LTD ACN 164 852 475 AS TRUSTEE OF THE KIDS ACADEMY HOPE ISLAND UNIT TRUST
JOHN BRUCE WHITELAW
KA ESTATES PTY LTD
JBW ESTATES PTY LTD
ACN 600 612 819 AS TRUSTEE OF THE JBW FAMILY TRUST
8477 of 2018
Supreme Court at Brisbane
16 September 2020
6 July 2020
J W Peden QC for the plaintiffs
M M Stewart QC, with Dr D C Clarry for the defendants
Van de Graaff Lawyers for the plaintiffs
Russells for the defendants
- The parties are in dispute as to how the balance of a sum of money (“the Trust Security”) held by the solicitors for the plaintiffs pursuant to consent orders made by Mullins J (as her Honour then was) on 12 September 2018 should be distributed. The original amount of the Trust Security was $524,389.10. The present balance is $478,942.04.
- There are two applications before the Court. The defendants apply for orders requiring the plaintiffs to direct their solicitor to pay an amount of $138,297.25 from the balance of the Trust Security to the second defendant, or alternatively an order that the plaintiffs’ solicitor pay that amount to the second defendant. The amount of $138,297.25 constitutes a shortfall in rent not paid by the second plaintiff, Kids Academy, to the second defendant, KA Estates, for the months of April, May and June 2020. The plaintiffs apply for orders that part of this sum, namely $90,894.12 be paid into Court pending the determination of all issues as to any entitlement respectively of the parties to that sum. The plaintiffs also seek the release of the remaining balance of the Trust Security ($388,047.92) held in their solicitors’ trust account “to one or more payees as directed by [the plaintiffs]”.
- The applications arise in the following circumstances.
- On 16 July 2014, KA Estates and Kids Academy executed a lease which was subsequently registered on 12 February 2016. A childcare centre was operated from the leased premises.
- In Hookey & Anor v Whitelaw & Ors, the Court determined that KA Estates lawfully terminated the lease on 11 September 2018. A declaration to this effect was made by the Court on 7 April 2020. Prior to the making of this declaration, the parties had been in dispute about the status of the lease since 2018. The consent orders made by Mullins J were made in circumstances where KA Estates sought an order for recovery of possession from Kids Academy.
- The orders made by Mullins J on 12 September 2018 were expressed to be upon the plaintiffs giving the undertakings set out in Schedule A to the orders. Paragraphs 1 and 2 of the undertakings required Kids Academy to make payments to KA Estates for rent, outgoings and GST due under the lease. Paragraph 3 of the undertakings required the plaintiffs to provide to their solicitors an irrevocable written authority and direction in the following terms:
“We, SCOTT GREGORY HOOKEY and KIDS ACADEMY HOPE ISLAND PTY LTD give this authority and direction pursuant to our undertaking to the Supreme Court of Queensland in Proceeding No 8477 of 2018 given on 12 September 2018.
We HEREBY IRREVOCABLY AUTHORISE AND DIRECT you to deal with the sum of $524,389.10 (“the Trust Security”) in your trust account on the following bases until further order of the court:-
- (a)your firm is to have the same obligation to make payment from the Trust Security to the second defendant, KA Estates Pty Ltd, as would a bank issuing a bank guarantee in favour of the second defendant pursuant to clause 36 of the Registered Lease, and
- (b)the second defendant is to have the same right under clause 36 of the Registered Lease to call on your firm to make payment from the Trust Security to the second defendant as the second defendant has to call on a bank guarantee in favour of the second defendant issued pursuant to clause 36 of Registered Lease,”
- Paragraph 5 of the undertakings provided that Kids Academy “will pay the rent, other outgoings and any other monies payable in accordance with the Registered Lease, save and except for any interest on late payments claimed by KA Estates thereunder and for sums payable under the Registered Lease in relation to the period before 1 October 2018”.
- On 17 October 2018, Jackson J placed the proceedings on the Commercial List. On 13 November 2018, his Honour made orders dismissing both the plaintiffs’ application for interlocutory relief restraining the defendants from terminating Kids Academy’s right to occupy the leased premises, and the defendants’ application for recovery of possession.
- The trial was heard before me on 22 to 31 October 2019, with further submissions received on 5 and 15 November 2019. Judgment was delivered on 7 April 2020. The orders made on that date, as well as including a declaration that the lease was lawfully terminated by KA Estates on 11 September 2018, included orders 6 and 7:
- “6.Kids Academy be granted relief against forfeiture as claimed in para 84D of the fourth further amended statement of claim.
- 7.I will hear the parties further as to the terms of the grant of relief against forfeiture.”
- Orders 6 and 7 reflect that any grant of relief against forfeiture was always going to be subject to conditions. This is evident from the Reasons:
“Any grant of relief against forfeiture should therefore be subject to terms which deal with both the outstanding payment of interest on late payments and the payment of legal costs incurred by KA Estates in enforcing the lease.”
- The conditional nature of the grant of relief against forfeiture is also evident from  of the Reasons:
“In the result, I would grant Kids Academy relief against forfeiture but I will hear the parties as to terms limited to any outstanding payments of interest or costs under the lease.”
- Prior to the delivery of judgment on 7 April 2020, Kids Academy had defaulted in the payment of the April rent. On 3 April 2020, KA Estates’ solicitors gave notice to draw on the Trust Security in respect of rent due on 1 April 2020 in the sum of $90,894.11.
- Also on 3 April 2020, the Commonwealth Government published a “Mandatory Code” which contained details of a moratorium on evictions of commercial and residential tenants experiencing financial stress as a result of COVID-19.
- On 9 April 2020, the plaintiffs’ solicitors provided to KA Estates financial details about the childcare centre’s business, including that the turnover would be reduced by 50%. A proposal was made by the plaintiffs in accordance with the Mandatory Code that rent be reduced by 50%. On the same day, the solicitors for KA Estates agreed to accept a half rent payment for April of $45,447.06. This sum was accepted “under protest on account of rent and GST”.
- On 4 May 2020, Kids Academy paid half of the May rent in the sum of $45,447.06.
- On 6 May 2020, the solicitors for KA Estates demanded payment of the remaining half of the rent for April and May plus interest. This demand was made by reference to paragraphs (a) and (b) of the irrevocable authority dated 13 September 2018 and clause 36.2 of the lease.
- On 28 May 2020, the Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 (Qld) (“COVID Regulation”) commenced.
- On 29 May 2020, after exchange of written submissions, the Court delivered further Reasons which identified the terms upon which relief against forfeiture would be granted. There were two conditions, being the payment of $3,712.65 by Kids Academy to KA Estates (which has been satisfied), and the delivery of a bank guarantee by Kids Academy to KA Estates within 21 days (by 19 June 2020). On 18 June 2020, the Court heard and dismissed an application by the plaintiffs for an extension of time for the delivery of the bank guarantee. Kids Academy failed to deliver a bank guarantee to KA Estates by 19 June 2020 and voluntarily vacated the leased premises on 20 June 2020.
- On 1 June 2020, Kids Academy made payment to KA Estates for half of the June rent in the sum of $45,447.06.
- In early June 2020, the parties exchanged correspondence as to the status of the lease and the Trust Security. Relevantly, Kids Academy contends that the COVID Regulation applies. KA Estates contends to the contrary.
- In an email dated 15 June 2020, Kids Academy sought rent relief under the COVID Regulation. According to Kids Academy, that claim is at the stage of the (required) consultation between the parties. If no agreement can be reached about the quantum of rent to be paid for the months of April and May 2020, Kids Academy has foreshadowed making an application to QCAT, as provided for under the COVID Regulation. Kids Academy seeks to have the disputed rent for the months of April and May 2020, being the sum of $90,894.12, paid into Court pending the outcome of the procedure under the COVID Regulation, including any application to QCAT.
- There are two primary issues to be determined:
- (a)Is KA Estates entitled to payment from the Trust Security in the sum of $138,297.25? This issue requires consideration of the following sub-issues, namely:
- What is the status of the lease?
- Does the COVID Regulation apply to the lease?
- (b)What should happen to the balance of the Trust Security?
What is the status of the lease?
- The plaintiffs accept that, as declared by the Court on 7 April 2020, the lease was lawfully terminated by KA Estates on 11 September 2018. Kids Academy, however, had applied for relief against forfeiture, which was conditionally granted on 7 April 2020. The relevant conditions for any grant of relief against forfeiture were identified in the Court’s Reasons of 29 May 2020, delivered one day after the COVID Regulation commenced. Order 12 of the orders made on 29 May 2020 stated the conditions of relief against forfeiture:
“12. IF –
- (a)within twenty-one (21) days of this judgment, the second plaintiff has paid the sum of $3,712.65 referred to in paragraph 5 to the second defendant; and
- (b)within twenty-one (21) days of this judgment, the second plaintiff has delivered the Bank Guarantee to the second defendant; and
THEN subject to paragraph 13 of this order:
- (c)the second plaintiff shall thereupon be relieved from forfeiture of the Registered Lease under the notices dated 11 June 2018, 16 October 2018 and 13 March 2019;
- (d)the second defendant shall take no step to enforce any of the said notices.”
- Kids Academy did not provide a bank guarantee within 21 days and therefore was not relieved from forfeiture of the lease. Order 13 stated the consequences of Kids Academy failing to fulfil this condition:
“13. IN THE EVENT of any default on the part of either of the plaintiffs in the satisfaction of any of the conditions set out in subparagraphs 12(a) and 12(b) hereof THEN the second defendant shall thereupon be entitled:
- (a)to recover possession of the land the subject of the Registered Lease;
- (b)to issue an Enforcement Warrant for possession of the said land and/or for the recovery of any sums payable under these orders; and
- (c)to request the Registrar of Titles (in Form 14 – General Request, Land Title Practice Manual (Queensland)) to register its re-entry under the Registered Lease.”
- In the above circumstances, the plaintiffs submit that having made an application for relief against forfeiture:
“The ‘twilight period of uncertainty’ of the Lease that existed between 11 September 2018 and 7 April 2020 was, by the intervening steps, extended until the expiry of 21 days after 29 May 2020, being 19 June 2020. Until then, the second plaintiff, as lessee, ‘can seek to rely on or enforce the covenants in the lease against the lessor’. From the lessee’s standpoint, the Lease is still binding on the lessee; indeed, both parties.”
- The effect of this submission is that when the COVID Regulation commenced on 28 May 2020, there was a binding lease between KA Estates and Kids Academy.
“[T]he bringing of an ejectment for a forfeiture, and serving it on the lessee in possession, must be considered as the exercise of the lessor’s option to determine the lease; and the option must be exercised once for all … for after such an act, by which the lessor treats the lessee as a trespasser, the lessee would know that he was no longer to consider himself as holding under the lease, and bound to perform the covenants contained in it; …”
- Lightman J observed:
“Parke B. went on to say: ‘And it would be unjust to permit the landlord again to change his mind and hold the tenant responsible for the breach of duty, after that time.’
The words of Parke B were uttered in the context where the breaches of covenant by the lessee and the entitlement of the lessor to forfeit were established. The words and the same principle have been applied in cases where, after the service of the writ, the lessee has challenged the lessor’s right to forfeit or claimed relief from forfeiture. In such a situation the validity of the forfeiture must await to be determined either by the court or by agreement of the parties. In the meantime there is inevitably a twilight period of some uncertainty. During this period the lessor is on the principle stated by Parke B. precluded from treating the terms of the lease or the covenants in the lease as on foot as against the lessee; but the lessee who has not elected to determine the lease can seek to rely on and enforce the covenants in the lease against the lessor …”
- Lightman J determined that a lessor who had served a writ making an unequivocal election to forfeit could not subsequently set up the invalidity of his act of forfeiture, particularly after the lessee had pleaded his admission of the breach and of the lessor’s entitlement to forfeit.
- One of the cases referred to by Lightman J was the decision of the Court of Appeal in Associated Deliveries Ltd v Harrison & Another. Dillon LJ (with whom Stephenson and Kerr LJJ agreed) identified “the well established principle that service of the writ determines a lease as an unequivocal election by the landlord to forfeit the lease …”. His Lordship observed:
“… In the present context of forfeiture proceedings the estoppel is the other way, as was pointed out by Parke B. in Jones v Carter, in that the landlord having elected to forfeit the lease by the unequivocal act of serving proceedings for possession, is estopped from treating the term of the lease and the covenants in the lease as still on foot for the purpose … of suing the tenant for rent. …
… It is not put so much on estoppel as the allied principle that a party cannot blow hot and cold in that if he takes the benefit under a document he must take the burden of it also; or, as it is sometimes put, if he is holding under the lease or under colour of the lease he must accept the restrictions of the lease also.
The other decision on the same lines was a decision of this court in Driscoll v Church Commissioners for England, where during the period while an application for relief against forfeiture was pending the tenant made an application to the Lands Tribunal for the variation of the covenants in the lease, and it was held that he had a sufficient interest in the property to support that application. The only direct relevance of the case is that in his judgment Denning LJ recognised a parallel between the case where forfeiture was claimed and the case where the right to forfeit was disputed. He said:
‘… although a writ is an unequivocal election, nevertheless, until the action is finally determined in favour of the landlord, the covenant does not cease to be potentially good. For instance, the forfeiture may not be established or relief may be granted, in which case the lease is re-established as from the beginning.’
There is, therefore, this twilight period during which it is not clear whether a forfeiture is going to be effective if, for instance, the allegations of breach of covenant are denied, or if for any reason it is said that the procedural requirements of modern statutes have not been complied with, or relief against forfeiture may be granted, which will restore the original lease ab initio. Problems can arise in that period; we were referred to a decision of this court in Peninsular Maritime Ltd v Padseal Ltd in which, on a cross-undertaking in damages from the lessee whose lease was alleged to have been forfeited, a landlord was ordered by way of interim injunction to restore and repair, as far as he could, the lift service to the upper floors demised by the lease of a particular building. That, as it seems to me, is the sort of state of affairs which may well arise and would have to be dealt with, as it was in that case, on the accepted principles applicable to the grant of interlocutory relief. It is not a decision which binds this court to conclude that the landlords’ covenants, let alone the tenants’ covenants, continue to subsist and be enforceable during the twilight period; it is a practical decision, essentially on balance of convenience, to deal with a problem that has arisen until such time as the court can decide whether the covenants subsist or not. …” (Footnotes omitted)
- The relevant principle is that where a lessor has elected to claim a right to forfeiture of the lease which is subsequently established, the lease will only be restored ab initio if relief against forfeiture is granted.
- The plaintiffs seek to apply the above principle to the present case as follows:
“… the lease having determined there’s a twilight period of uncertainty and forfeiture is something which we applied for relief against, that wasn’t determined until 7th of April at which time there was a determination. So there’s no lease in place till then, the lease on the 7th of April became binding again by the relief against forfeiture. The terms of that were – the further terms were the subject of submissions and then your Honour’s ruling on the 29th of May which kept alive the lease for another three weeks. So there was a period from the 7th of April to the 18th of June when the lease was revived. And that’s why we say, for the COVID Regulation, the lease was binding on the lessee on the 28th of May when the regulations came in. That is the day before your Honour ruled.”
- I do not accept this submission. It proceeds on the basis that the relief against forfeiture granted on 7 April 2020 was unconditional. As identified in paragraphs  and  above, any grant of relief against forfeiture was always subject to conditions. Orders 6 and 7 made on 7 April 2020 must be read together. Further, Orders 8, 12 and 13 made on 29 May 2020 specified the conditions of the grant of relief against forfeiture. In the Reasons delivered on 29 May 2020, I noted under the heading “Conditions of relief against forfeiture” at :
“The parties are in general agreement that pursuant to clause 36.1 of the registered lease, the second plaintiff should deliver to the second defendant, care of its solicitors, a banker’s undertaking for the sum of $524,389.10. The only dispute as to the provision of this bank guarantee concerns its timing and form.”
- I further noted, at  of the Reasons, the plaintiffs’ submission that the provision of the bank guarantee and the payment of interest in the sum of $3,712.65 should be the only two conditions of any grant of relief against forfeiture. This was in circumstances where the defendants sought additional conditions. As Kids Academy failed to comply with one of the conditions for the grant of relief against forfeiture, the lease was never restored ab initio. The lease remained lawfully terminated from the date of termination by KA Estates on 11 September 2018.
Does the COVID Regulation apply to the lease?
- The short answer is “no” because the lease, having been lawfully terminated on 11 September 2018, is not an “affected lease” for the purposes of the COVID Regulation.
- The COVID Regulation was made pursuant to s 23 of the COVID-19 Emergency Response Act 2020 (Qld) (“COVID Act”) which commenced on 23 April 2020. One of the main purposes of the COVID Act identified in s 2(c) is “to provide for matters related to residential, retail and prescribed leases affected by the COVID‑19 emergency”. Part 7 of the COVID Act deals with retail leases and other prescribed leases. Section 23 provides for the regulation-making power for retail leases and other prescribed leases. Section 23(8) defines “lease” to include “a lease, sub-lease, licence or other agreement under which a person grants a right to another person to occupy premises, other than as a residence.”
- By reg 2 of the COVID Regulation, it is declared that the COVID Regulation is made under s 23 of the COVID Act. As observed above, the COVID Regulation commenced on 28 May 2020. One of the main purposes of the COVID Regulation identified in reg 3(b)(ii) is to establish a process for resolving “affected lease disputes”. Section 5 of the COVID Regulation provides a definition of “affected lease”:
“(1) A lease of premises is an affected lease if –
- (a)it is –
- (i)a retail shop lease; or
- (ii)a prescribed lease; and
- (b)on the commencement the lease, or an agreement to enter into the lease, is binding on the lessee, whether or not the lease has commenced; and
- (c)the lessee under the lease is an SME entity; and
- (d)the lessee under the lease, or an entity that is connected with, or an affiliate of, the lessee responsible for, or involved in, employing staff for the business carried on at the leased premises, is eligible for the jobkeeper scheme.”
- There is no dispute that Kids Academy is an SME entity and is eligible for the JobKeeper scheme. The difficulty for Kids Academy is that when the COVID Regulation commenced on 28 May 2020, the lease had been lawfully terminated approximately 18 months prior and was therefore not one which was “binding on the lessee”.
- Kids Academy, however, submits:
“As at 28 May 2020, the parties were operating under the Order dated 7 April 2020. Relief against forfeiture had been granted, albeit with further submissions and a further Order likely. But, no conditions had been set as at 28 May 2020. The parties were either in a position where the Lease was back on foot, or alternatively potentially still in the ‘twilight period of uncertainty’.”
- For the reasons outlined in  to  above, this submission cannot be accepted.
- As outlined above, s 23(8) of the COVID Act gives the word “lease” a wide definition which includes “or other agreement under which a person grants a right to another person to occupy premises”. On 28 May 2020, Kids Academy was in occupation of the premises pursuant to the consent orders made by Mullins J on 12 September 2018. Paragraphs 1 and 2 of the undertakings attached to the orders required Kids Academy to make payments to KA Estates for rent, outgoings and GST due under the lease. Pursuant to the irrevocable authority, the solicitors for Kids Academy had the same obligation to make payment from the Trust Security to KA Estates “as would a bank issuing a bank guarantee in favour of the second defendant pursuant to clause 36 of the Registered Lease”. Under the irrevocable authority, KA Estates had the same right to call on the solicitors for the plaintiffs to make payment from the Trust Security as it had to call on a bank guarantee issued pursuant to clause 36 of the lease. Consistently with these undertakings and as recorded in  above, on 6 May 2020, KA Estates demanded payment of the remaining half of the rent for April and May by reference to paragraphs (a) and (b) of the irrevocable authority and clause 36.2 of the lease.
- There are circumstances in which a consent order may also constitute a contract between the parties. This was described by Lord Denning MR in Siebe Gorman & Co Ltd v Pneupac Ltd as follows:
“We have a discussion about ‘consent orders’. It should be clearly understood by the profession that, when an order is expressed to be made ‘by consent’, it is ambiguous. There are two meanings to the words ‘by consent’. That was observed by Lord Greene MR in Chandless-Chandless v Nicholson … One meaning is this: the words ‘by consent’ may evidence a real contract between the parties. In such a case the court will only interfere with such an order on the same grounds as it would with any other contract. The other meaning is this: the words ‘by consent’ may mean ‘the parties hereto not objecting’. In such a case there is no real contract between the parties. The order can be altered or varied by the court in the same circumstances as any other order that is made by the court without the consent of the parties. In every case it is necessary to discover which meaning is used. Does the order evidence a real contract between the parties? Or does it only evidence an order made without obligation?”
- Queensland and High Court authority demonstrates this principle. For instance, in Spencer v Nominal Defendant, the Court of Appeal identified that “[a] consent order operates both as a contract and an order of the court.” Citing the High Court in Harvey v Phillips, the Court stated that in such cases, the ability to set the consent order aside depends on “the existence of a ground which would suffice to render a simple contract void or voidable or to entitle the party to equitable relief against it”. To similar effect are the observations of McPherson SPJ in Fylas Pty Ltd v Vynal Pty Ltd (referring to Siebe Gorman) that:
“A Court has no general power to release a party from a contract or to vary its terms. It does not acquire any such power because the parties have elected to incorporate their promises in the form of undertakings tendered to the Court. The principal advantages to the parties in taking that course lie in facilitating proof and enforcement of their agreement. The terms of their promises are formally set out in the public records of the Court and are capable of being summarily enforced by attachment or other process of the Court. In addition, if the order or undertaking is of a character that requires working out, the Court may be applied to for its assistance in elucidating its terms so as to render it efficacious in matters of detail. None of this, however, invests the Court with a power to vary or determine the agreement of the parties.”
- However, as suggested by Lord Denning MR in Siebe Gorman, there are also instances in which consent orders will not amount to contracts between the parties. His Lordship illustrated this point with reference to a hypothetical scenario:
“I cannot put any such interpretation on the order which was drawn up in this case. It often happens in the Bear Garden that one solicitor or legal executive says to the other: ‘Give me ten days.’ The other agrees. They go in before the master. They say: ‘We have agreed the order.’ The master initials it. It is said to be ‘by consent’. But there is no real contract. All that happens is that the master makes an order without any objection being made to it. It seems to me that that is exactly what happened here. The solicitors for the plaintiffs were saying: ‘We do not object to the order. Give us the extra ten days from the time of inspection, and that is good enough.’ It seems to me quite impossible in this case to infer any contract from the fact that the order was drawn up as ‘by consent’.”
- Similarly, it is clear from subsequent Queensland cases that the principle in Spencer is not applicable to all consent orders. For instance, in Venz v Moreton Bay Regional Council, the Court of Appeal considered a consent order granting one party leave to initiate proceedings by a certain date, finding that:
“In this case it is doubtful that the subject order constituted an agreement between the parties as opposed to an order to which both parties consented. In this regard, it is relevant that the subject order was interlocutory, required the exercise of a discretion by the Court and gave the parties liberty to apply.” (Footnotes omitted)
Venz was also applied, distinguishing Spencer, in Blundstone v Johnson, which concerned consent orders on similar terms to those considered in Venz. Holmes JA (as her Honour then was) stated that:
“The learned primary judge here considered the consent order agreed by the applicants and the respondent, and distinguished it from that in Spencer. It was, he said, more like an order of the court made with the consent of the parties than an order embodying a compromise. Its making required an exercise of discretion; it was more akin to the consent order under consideration in [Venz].
The learned judge was, in my view, correct in distinguishing the consent order in this case from that in Spencer. The type of analysis Muir JA undertook in Venz commends itself here.
It is worth mentioning the distinction identified by Atkinson J in Moga v Australian Associated Motor Insurers Ltd, between
‘… a consent order which embodies the terms of a contract between the parties and a consent order based on the parties’ willingness to submit to an order on certain terms,’
a distinction explained by Lord Denning MR in Siebe Gorman & Co Ltd v Pneupac Ltd. That distinction, in my respectful view, is a valid and useful one; and in the present case the facts, as the learned primary judge found, fall within the latter class.” (Footnotes omitted)
- Neither party made submissions as to whether the consent orders made by Mullins J constituted an “agreement” for the purposes of the definition of “lease” in s 23(8) of the COVID Act. However, even if it was accepted that the consent orders did constitute an “agreement”, it is not an agreement “under which a person grants a right to another person to occupy premises”. I accept the submission made by KA Estates:
“Further, [Kids Academy’s] right to occupy the premises arose from the order of Mullins J and, in particular, the interlocutory regime established by the undertakings recorded therein to preserve the (pre‑termination) status quo pending the outcome of the proceeding. That, however, is insufficient to constitute such occupancy as an ‘affected lease’ under the COVID Regulation. [Kids Academy’s] occupancy of the premises after 11 September 2018 did not arise from the ‘grant’ of a right by KA Estates to [Kids Academy] to occupy the premises (as required to enliven the COVID Regulation); rather, KA Estates agreed, subject to the resolution of the proceeding, not to act on the rights afforded to it by virtue of its termination of the Registered Lease on 11 September 2018. An agreed restraint from acting on legal rights does not ‘grant’ a right to occupy nor does it constitute a ‘lease’.” (Footnotes omitted)
What should happen to the balance of the Trust Security?
- The plaintiffs seek access to the balance of the Trust Security on two bases. First, that the undertakings the subject of the consent orders were only expressed to apply until trial of the proceeding or further order. Secondly, to the extent that it might be argued the Trust Security was regarded as akin to security under the lease, the lease was determined on 11 September 2018. Accordingly, as submitted by the plaintiffs:
“Once the Lease was determined, on 11 September 2018, the second defendant was, from the period from 11 September 2018, ‘precluded from treating the terms of the lease or the covenants in the lease as on foot as against the lessee’.”
- Neither of these bases constitute a sufficient reason for granting the plaintiffs’ application. In accordance with the irrevocable authority, the parties had both obligations and rights in respect of the Trust Security “as would a bank issuing a bank guarantee in favour of the second defendant pursuant to clause 36 of the Registered Lease”. Relevantly, clause 36.2 of the lease provides:
“In the event that the Lessee defaults in complying with any obligation on its part contained or implied in this Lease, the Lessor shall immediately thereafter and without notice to the Lessee be entitled to call upon the Security either wholly or in part and to apply any monies received to indemnify the Lessor in full for any damage, loss, expense or other payment suffered or incurred or made by the Lessor in consequence of the Lessee’s default.”
- As correctly submitted by KA Estates, the Trust Security ought to remain in place and continue to function as a bank guarantee under clause 36 of the lease in order to secure any obligations continuing after the termination of the lease. For example, under clause 14.1.2(f) of the lease, Kids Academy remains liable to pay KA Estates reasonable costs incurred in connection with the termination of the lease. Pursuant to clause 19.3, Kids Academy is required to carry out the “Reinstatement Works” to the reasonable satisfaction of KA Estates. The term “Reinstatement Works” is given a wide definition in clause 19.1 and includes all works necessary to return the premises and building to its previous configuration, as well as the removal of all Kids Academy’s fittings, together with the repair of any damage to the premises or the building.
- In circumstances where these covenants survive termination and where Kids Academy has failed to provide a bank guarantee, the Trust Security should remain in place. Mr Whitelaw deposes that KA Estates intends to resort to the Trust Security to satisfy those liabilities.
- The plaintiffs’ application should be dismissed.
- The Court orders:
- Secure Legal Pty Ltd forthwith pay to the second defendant the sum of $138,297.25 from the balance of the Trust Security held by them pursuant to the order of Mullins J made 12 September 2018.
- The plaintiffs’ application filed 25 June 2020 is dismissed.
- The Court will hear the parties as to costs.
This figure constitutes the rent and interest ($138,297.25) less one month’s rent and all the interest.
Application filed 25 June 2020, para 1.
 QSC 63, .
Hookey & Anor v Whitelaw & Ors  QSC 63.
Hookey & Anor v Whitelaw & Ors  QSC 63, .
Affidavit of Mark Fraser sworn 30 June 2020, exhibit MAF-A, page 66.
Hookey & Anor v Whitelaw & Ors  QSC 147.
Outline of Submissions of the Applicant, para 31; affidavit of Mark Fraser sworn 30 June 2020, para 44.
Plaintiffs’ Application filed 25 June 2020, para 2.
Hookey & Anor v Whitelaw & Ors  QSC 63, Orders 6 and 7.
 1 WLR 1088, 1093.
(1846) 15 M & W 718, 726.
(1984) 50 P & CR 91, CA.
Associated Deliveries Ltd v Harrison & Another (1984) 50 P & CR 91, CA, 98.
Associated Deliveries Ltd v Harrison & Another (1984) 50 P & CR 91, CA, 99-101.
T 1-15, lines 35-45.
Affidavit of Mark Fraser sworn 30 June 2020, paras 34 and 35.
Outline of Submissions of the Applicant, para 52(a)(ii).
 1 All ER 377, 380.
 2 Qd R 64, 68.
(1956) 95 CLR 235.
Spencer v Nominal Defendant  2 Qd R 64, 68; Harvey v Phillips (1956) 95 CLR 235, 243.
 2 Qd R 593, 601.
 1 All ER 377, 380.
Venz v Moreton Bay Regional Council  QCA 224.
 QCA 224, .
 QCA 148.
Defendants’ Outline of Argument, para 35.
Outline of Submissions of the Applicant, para 46.
Affidavit of Mr Whitelaw dated 4 July 2020, paras 2-21.
- Published Case Name:
Hookey & Anor v Whitelaw & Ors (No 3)
- Shortened Case Name:
Hookey v Whitelaw (No 3)
 QSC 284
16 Sep 2020