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Thistle Investment Pty Ltd v MXL Investment Pty Ltd[2024] QSC 247

Thistle Investment Pty Ltd v MXL Investment Pty Ltd[2024] QSC 247

SUPREME COURT OF QUEENSLAND

CITATION:

Thistle Investment Pty Ltd v MXL Investment Pty Ltd [2024] QSC 247

PARTIES:

THISTLE INVESTMENT PTY LTD ACN 056 657 268 AS TRUSTEE UNDER INSTRUMENT 711113027

(applicant)

v

MXL INVESTMENT PTY LTD ACN 634 258 610

(respondent)

FILE NO:

BS 3531/24

DIVISION:

Trial

PROCEEDING:

Trial (commenced by originating application)

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

21 October 2024

DELIVERED AT:

Brisbane

HEARING DATE:

20 September 2024

JUDGE:

Freeburn J

ORDER:

  1. The application filed on 20 March 2024 is refused.
  2. I will hear the parties on costs.

CATCHWORDS:

REAL PROPERTY – TORRENS TITLE – LEASES – GENERALLY – where the defendant was assigned a lease in a hotel – where the hotel was in poor condition before the lease was assigned – where, during the lease, the plaintiff lessor  complained that the hotel was in poor condition – where subsequently, the plaintiff sought to terminate the lease – where the plaintiff was first required to serve a notice to remedy breach that complied with s 124 Property Law Act 1974 (Qld) – where the plaintiff served a notice with defects, one being a report attached as an annexure identifying all remedial work to be done at termination, not to remedy a breach – where the notice stated the defendant was to undertake all remedial works, including those identified in the report – whether the plaintiff validly terminated the lease – whether there is sufficient evidence to establish that the defendant breached the lease

Property Law Act 1974 (Qld), s 124

Blewett v Blewett [1936] 2 All ER 188, explained

Elsafty Enterprises Pty Ltd v Mermaids Café & Bar Pty Ltd [2007] QSC 394, cited

Guillemard v Silverthorne (1908) LT 584, explained

Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268, distinguished

Re Automotive and General Industries Ltd v Bryson Industries (Vic) Pty Ltd (2012) V Conv R 54-801, explained

Sylvester v Ostrowska [1959] 1 WLR 1060, explained

COUNSEL:

SW Trewavas for the applicant

J Trost for the respondent

SOLICITORS:

OMB Solicitors for the applicant

Stephens & Tozer for the respondent

  1. Background
  1. [1]
    Just a stone’s throw from the court building, in the Brisbane CBD, just near the Turbot Street overpass, is a building known as “The Explorers Inn”.  It is a four storey red brick building built in 1916.[1]  The hotel provides what is described as ‘affordable accommodation’. The building is owned by the applicant company, Thistle Investment Pty Ltd.
  2. [2]
    In April 2015 Thistle leased the building to Brisbane Holidays Pty Ltd.  About 18 months later Brisbane Holidays assigned its interest as lessee to Feng Group Investments Pty Ltd.  Then, in November 2022, Feng Group assigned its interest as lessee to the respondent, MXL Investment Pty Ltd.  And so MXL became the lessee in November 2022, although it may be that the physical transfer of the operations of the hotel occurred a little earlier, in about July 2022.
  3. [3]
    Through those transfers of the lease the name of the hotel changed from Explorer’s Inn to City Edge Brisbane Hotel and then to its present name, Turbot House Hotel. 
  4. [4]
    When MXL took over the hotel, Ms Di Meng, described as the ‘effective manager’ of MXL, documented the poor condition of the hotel in a series of photographs she sent to Thistle’s director and representative, Mr Singh.  Although they are in black and white, the photographs rather starkly show that, when MXL took over, the hotel was not only dirty but had a number of serious defects including holes in the walls and missing electrical fittings.  The ‘long-term’ rooms were described as having a “terrible smell” which was not eradicated by cleaning, vacuuming and the spraying of fragrances.
  5. [5]
    Thistle was unimpressed.  Thistle’s director, Mr Singh, wrote to the previous lessees saying this:

Hi Anna

To say I’m disgusted, not too (sic) mention personally disappointed in the state you have left the rooms in.  I believe there are rooms there that you wouldn’t have seen the inside off (sic), in over a year.  There is not going to be any money left out of your bank guarantee.

We will be discussing with out (sic) legals, as to whether any further action can be taken.

You need to decide whether you want to pay me the amount of the guarantee, or whether I need to enforce it.  FYI it would be better for future Cr[2] assessment that you pay me.

Receipts will be provided for all payments made, to the satisfaction of your accountants. 

If I incur legal fees, you will be liable for them.

  1. [6]
    There seems to have been some discussions because on 24 September 2022 Mr Singh texted Ms Deng saying:

A room to room dossier will be required of all damage. Not a real emergency but by the end of the week will be good. You start fixing where you can & keep all receipts as expenses are incurred per room.

Once you have completely cleared one room, we will take that cost & multiply by the number of bad rooms.

  1. [7]
    Ms Deng responded: “Will do. Thanks.”
  2. [8]
    That text exchange hints at an arrangement or an agreement between Thistle and MXL whereby MXL would arrange the repairs that were necessary, and Thistle would pay for the repairs. Or the arrangement or agreement may have been that Thistle would pay an amount calculated by assessing the cost of repair of a room and multiplying that cost by the number of ‘bad rooms’. Oddly though, whilst Ms Deng exhibits the text messages to her affidavit, Ms Deng does not depose to any such arrangement or agreement. 
  3. [9]
    Just when that happened is not clear. In particular, it is unclear whether and what repairs were carried out by Thistle, or by MXL, or whether Thistle pursued the Feng Group to recover the cost of any such repairs.  
  4. [10]
    Six months later, on 19 April 2023, Thistle’s solicitors wrote to MXL complaining that:
    1. Thistle had not received maintenance contracts with reputable contractors for the mechanical services in accordance with clause 5.8 of the lease;
    2. Thistle had also not received maintenance contracts for the firefighting equipment in accordance with clause 5.8;
    3. MXL had not been keeping the premises in a thorough state of cleanliness in accordance with clause 6.4(a);
    4. MXL had not been supervising behaviour at the hotel with the result that there was a breach of clause 6.5 and there had been numerous complaints by neighbours;
    5. MXL had failed to keep the hotel in good and substantial repair and working order and condition, contrary to clause 7;
    6. There were numerous defects in the premises said to be contrary to clause 8(b) (which requires painting of the premises in a proper workmanlike manner);
    7. The hotel was in an extremely unsatisfactory condition and is in need of major repairs by MXL.
  5. [11]
    Thistle’s solicitors gave notice of a proposed inspection on 5 May 2023.  There was then a period in which the parties exchanged correspondence.
  6. [12]
    On 6 December 2023 Thistle’s solicitors gave MXL a notice to remedy breaches under s 124(1) of the Property Law Act 1974 (Qld) (‘the Act’). This notice was issued in the form required by the Act – Form 7. On 2 February 2024 Thistle’s solicitors advised of a proposed inspection on 7 February 2024. Presumably that inspection occurred and was unsatisfactory to Thistle because, on 5 March 2024, Thistle’s solicitors sent a letter to MXL terminating the lease and requiring possession by 7 March 2024.
  7. [13]
    It can be seen that there is an odd leisurely pace to all of this. The inspection on 5 May 2023 seems to have led to a Form 7, but some 6 months later. And that Form 7 led to an inspection 2 months after that, and then a termination some 3 months after the Form 7. As will be seen, the hotel continued to operate during all of that time and various repair and replacement work was carried out.[3]
  8. [14]
    In any event, having terminated on 7 March 2024, Thistle commenced these proceedings on 20 March 2024 seeking a declaration that the lease had been validly terminated.  MXL resists that declaration but has brought no cross-application for relief under s 124(2) of the Act. The parties informed me that MXL continues to operate the hotel, pending these proceedings.
  1. The Issues
  1. [15]
    During case management of the proceeding attempts were made to have the parties properly identify and confine the issues.  Those attempts proved largely unsuccessful.  There is a points of claim document which was drafted by Thistle’s lawyers, with additions and responses by MXL’s lawyers.  That document comprises roughly 47 items and runs to 20 pages.
  2. [16]
    On 12 July 2024, Muir J ordered that the trial be set down for 19 August 2024.  On the eve of the trial, the trial was adjourned.  At the same time, Muir J ordered that Thistle file and serve a list of issues limited to one page and that MXL, if necessary, respond – also limited to one page.
  3. [17]
    A one-page list of issues was filed and served by Thistle.  It lists nine issues.  MXL did not respond.  However, at the hearing MXL’s counsel concentrated largely on the ninth and last issue in Thistle’s list of issues – “Did [Thistle] validly terminate the Lease?”
  4. [18]
    That one broad issue obscures some fairly significant subsidiary issues namely:
    1. Did MXL breach the lease, and what were those breaches?
    2. Were those breaches properly notified, and required to be remedied, in Thistle’s notice to remedy breach (Form 7) served on 6 December 2023?
    3. Did MXL fail to remedy those notified breaches within a reasonable time?[4]
  1. A Preliminary Issue 1: Pre-Existing Defects
  1. [19]
    Before considering those three subsidiary issues, it is necessary to dispose of a lease interpretation issue, and some other preliminary issues.
  2. [20]
    The parties focussed on the state of the hotel as at 2015 when the lease commenced, and on the state of the hotel when MXL took possession in July 2022.  Thistle focussed on the former, and MXL focussed on the latter. For the following reasons, I consider that both approaches are incorrect.
  3. [21]
    Clause 7.1 of the lease provides as follows:

The Tenant will during the whole of the term of the Lease maintain and keep in good and substantial repair, working order and condition the Premises fair wear and tear excepted (having regard to the condition at the commencement of the Lease)[5] except for:-

  1. damage to the Premises for which the Tenant is not responsible ie not attributable to its use of the Premises;
  1. damage to the Premises caused by explosion, earthquake, aircraft, riot, civil commotion, fire, lightning, storm and tempest;[6]
  1. repairs of a structural nature;[7]
  1. repair, replacement or upgrade of Mechanical Services due to deterioration or obsolescence (other than regular servicing). [emphasis added]
  1. [22]
    The highlighted words at the beginning of the clause are important.  The obligation to “maintain and keep” the premises “in good and substantial repair” is an obligation that binds the lessee from beginning to end.  A lessee cannot escape the consequences of that clause by pointing out that a particular defect needing repair existed at the time the lease commenced, or at the time the present lessee assumed control from the previous lessee. As the text writers, Croft, Hay & Virgona explain:[8]

Even though the covenant does not require the tenant to ‘put’ the premises into repair, but requires him or her only to ‘keep’ the premises in repair, the tenant is not justified in keeping in a state of disrepair premises which are not in repair when he or she takes them; the tenant must put the premises into repair.

  1. [23]
    Plainly enough the age, character, condition and locality of the building is still relevant.  The standard of “good and substantial repair” is construed by reference to that age, character, condition and locality.[9] However, the primary obligation of the lessee under such clauses is to put the premises, and to keep the premises, in a good and substantial state of repair. If necessary, that will require the lessee to repair defects existing when the lessee assumed control of the premises.
  2. [24]
    MXL relied on the terms of the deed of covenant, a tripartite deed which transferred the lessee’s interest from the Feng Group to MXL with the consent of Thistle. But, that deed records that MXL, the new lessee will “observe perform fulfil and keep all covenants, conditions and agreements on the part of [MXL] contained in the said Lease in the same manner as if he was the original Lessee…”.[10] Clause 7.1 bound MXL from the moment it took the assignment of the lessee’s interest in the lease. From that time, MXL was bound to keep the premises in good and substantial repair. That included the obligation to put it into that state if it was not in that state.
  3. [25]
    In their further submissions, both parties accepted that Croft, Hay & Virgona had accurately stated the law. However, MXL submitted that those legal principles can be readily altered by parties to the lease. Undoubtedly that is correct. The parties may agree to vary their legal obligations. But no such agreement is identified by MXL. It is true that Thistle expressed disgust in the way that the hotel had been left by the Feng Group. Thistle also foreshadowed legal claims against the Feng Group for repairs to the hotel. And, as described above, in the correspondence between Thistle and MXL there is a hint of an arrangement or agreement that MXL would arrange, and Thistle would pay for some repairs. But no such agreement is raised by MXL as an issue, and there is no proper evidence of such an agreement. Ms Deng does not depose to any such agreement.
  1. Preliminary Issue 2: Waiver
  1. [26]
    Rather than asserting an agreement that altered the parties’ legal obligations, MXL’s argument seems to be based on the principles of waiver. This is the further submission of MXL:[11] 

The timeline of events is also relevant to the Notice given in December 2023. Until that time, the Applicant had been aware of breaches of the lease from inspections in September and October 2022, and in May 2023. However, at no time prior to December 2023 – almost 17 months after assignment of the Lease – had the Applicant notified the Respondent that it was in breach of an implied term to “put” the premises into repair (if it existed), nor communicated that it was the Respondent’s obligation to remedy. On the contrary, the Applicant (by Mr Singh) had only requested the Respondent to “fix where you can” and to forward receipts to the Applicant. The receipts to be kept were clearly for the purposes of holding the previous lessee solely liable for damage to the premises prior to the Respondent becoming assignee of the lease. The Applicant continued to demand and accept rent on this basis and therefore waived any breach of the implied covenant to put the Premises into repair (if it existed) which had crystallised well before the Form 7 Notice was given. However, the primary contention of the Respondent is that such a covenant never became part of the contract between the parties. At no time was the Respondent ever obligated to remedy breaches of the previous lessee.

  1. [27]
    There are a number of problems with that submission. One is that MXL’s case concerning waiver has not been clearly articulated in a pleading, issues document or an affidavit. There were no pleadings in the proceeding, but there were attempts to isolate the issues in lists of issues. MXL did not outline the waiver case in any issues document.[12] It would be inconsistent with the principles of procedural fairness to embark on a waiver case without, at the least, proper identification of the issue by MXL and affording Thistle proper notice of the waiver allegations as well as an opportunity to meet those allegations.
  2. [28]
    A second problem is that the ‘timeline of events’ relied on by MXL is really a submission with little or no reference to facts. There is certainly little reference to facts, perhaps because this issue was only explored after the hearing.
  3. [29]
    The third problem is that the facts outlined by MXL in its further written submissions do not appear to amount to a waiver. The allegation of waiver seems to be based on Thistle’s inaction, that is, its failure to insist on the repair required by the lease, and on Thistle’s request that MXL “fix where you can” and forward receipts to Thistle. That hardly qualifies as a waiver in the sense of a choice between inconsistent rights. Indeed, the implication is that it was MXL who was expected to arrange the repairs – as required by the lease - but with a prospect of reimbursement of those expenses by Thistle.
  4. [30]
    The fourth problem is that Thistle’s continued demand for the rent, and its acceptance of the rent, can hardly be a factor in favour of waiver given that MXL’s obligation to pay rent was an independent promise made by MXL. In the absence of any suspension of rent by agreement of the parties under clause 9(a)(ii) of the lease,[13] MXL continued to be liable for the rent. Thistle’s demand of the rent, and its acceptance of the rent, was perfectly consistent with the parties’ rights under the lease and can hardly be regarded as a choice between inconsistent rights or as a waiver of any of Thistle’s rights under the lease.
  5. [31]
    And so, even if the issue were fairly raised, there is an insufficient factual basis to make a finding of waiver.
  1. Preliminary Issue 3: Demarcation Between Lessor and Lessee Obligations to Repair
  1. [32]
    As explained, it was MXL’s obligation as lessee to maintain and keep the hotel in good and substantial repair, working order and condition, except for fair wear and tear. That meant that, in the absence of any contrary agreement, the obligation to repair or make good any damage fell on MXL as the lessee. But MXL’s repair obligation was qualified. It did not extend to repair of:
    1. damage to the hotel for which MXL was not responsible, that is, not attributable to MXL’s use of the hotel;
    2. damage caused by neutral events such as explosion, earthquake, aircraft, riot, civil commotion, fire, lightning, storm and tempest;[14]
    3. structural work, unless that structural work was required because of MXL’s acts or negligence or an express requirement in the lease;[15]
    4. mechanical services, provided the repair is not attributable to the misuse of the equipment by MXL or its invitees.[16] 
  2. [33]
    As lessor, Thistle has its own repair responsibilities if the hotel was destroyed or damaged by any cause other than neglect of MXL so as to be wholly or partially unfit or unsuitable for use by MXL as a hotel.[17] Curiously, in her affidavit, Ms Deng raises a number of issues that would seem to qualify as damage by reason of causes unrelated to MXL’s use of the hotel. The roof is damaged, and there is damage to the external front of the building.[18] And there have been plumbing and water infiltration issues which have meant that the hotel has been unable to operate a kitchen and dining room in the basement area.[19] Nevertheless, none of those issues made it onto the issues list and MXL does not seek any relevant relief.[20]
  1. Section 124(1)
  1. [34]
    Thistle seeks to terminate the lease. Before Thistle can exercise that right, it must comply with section 124(1) of the Act. That section is as follows:

Restriction on and relief against forfeiture

  1. (1)
    A right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant, obligation, 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—
  1. (a)
    specifying the particular breach complained of; and
  1. (b)
    if the breach is capable of remedy, requiring the lessee to remedy the breach; and
  1. (c)
    in case the lessor claims compensation in money for the breach, requiring the lessee to pay the same;
  1. and the lessee fails within a reasonable time after service of the notice 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.
  1. [35]
    The Act prescribes that the notice shall be in the approved form. That is Form 7.[21]
  2. [36]
    It will be noticed that s 124(1)(a) requires that the Form 7 notice specify the “particular breach complained of”.  Then, s 124(1)(b) and (c) refers to “the breach”.  That expression, “the breach” can only refer to the same breach – that is the particular breach complained of.  And so, the requirement is that the Form 7 notice:
    1. specify the breach; and
    2. require the lessee to remedy that breach.
  1. The Form 7
  1. [37]
    It is necessary to explain the Form 7 delivered by Thistle pursuant to s 124 of the Act. A letter from Thistle’s solicitors to MXL dated 6 December 2023 enclosed the Form 7 and stated this:

We attach a Form 7 Notice to Remedy Breach of Covenant (“the Notice”) under section 124 of the Property Law Act 1974 setting out the details of the breaches under the Lease by the Tenant and requiring remedy of the same within a reasonable time and as set out in the Notice.

The final day to remedy all the breaches and, as at the date of this letter is 4 January 2024.

If the breaches identified in the Notice are not remedied as required by our client and by law, then without prejudice to any of our client’s rights, our client shall regard itself as being legally entitled to terminate the Lease.

  1. [38]
    The attached Form 7 identified “the covenants by the Lessee described in Annexure A of this Notice” and “the breaches by the Lessee of those covenants as specified in Annexure A of the Notice”. In respect of those breaches the Form 7 continues:[22]

…the Lessor gives the Lessee notice and requires the Lessee to remedy those breaches by putting the premises in repair by doing and executing the repairs particularised in Annexure A of the Notice and in the remedial works described in the Make Good Assessment by PEP Solutions dated 16 June 2023 and attached to this Notice in accordance with the clauses 5.8, 6.4, 7.1, 7.3, 13.4, 11.4, 17.1, 17.2 17.3[23] within the following reasonable time periods…. [emphasis added]

  1. [39]
    And so, the relevant breaches are those specified in Annexure A to the Form 7, whilst the remedial work required of the lessee are those specified in both Annexure A and in the attached PEP report. Annexure A comprises a table which lists the relevant clauses of the lease, the breach alleged and the remedy. As will be discussed below, much of the content of Annexure A is exceedingly general.
  1. A Minor Problem with the Form 7
  1. [40]
    One problem with the Form 7 served by Thistle is that the breaches specified in the text of Annexure A are breaches of nine separate clauses, namely, clauses 5.8, 6.4, 7.1, 7.3, 13.4, 11.4, 17.1, 17.2 and 17.3. However, the breaches actually identified in Annexure A to the Form 7 are breaches of only seven clauses, namely 5.8, 6.4, 7.1, 7.3, 7.6, 7.9 and 13.4 of the lease.
  2. [41]
    Thistle agrees that the references to clauses 17.1, 17.2 and 17.3 are errors,[24] but argues that those errors do not invalidate the Form 7.[25]
  3. [42]
    On balance, I accept Thistle’s submission that the inconsistency between the text of the Form 7 and the content of Annexure A does not invalidate the Form 7. As McMurdo J explained in Elsafty Enterprises Pty Ltd v Mermaids Cafe & Bar Pty Ltd,[26] a Form 7 is not invalid in every case where it complains of a default which does not exist, or of a default which has been remedied, or where it demands an excessive sum.[27] The same principle must apply for an inconsistency like this where a fair reading of the Form 7 would suggest that the detail of the breaches and remedies are those contained in Annexure A.
  1. The Major Problem with the Form 7
  1. [43]
    On the other hand, the PEP report attached to the Form 7 creates a different problem. The PEP report is 105 pages long. The parties agreed that the PEP report was attached to and physically formed part of the Form 7 that was served on MXL. However, Thistle argued that the PEP report, although conceded as physically attached to the Form 7, should be regarded as “merely a document referred to in the Form 7”.[28] Probably not much turns on the issue of whether the PEP report is regarded as part of the Form 7 or merely as a document referred to by the Form 7. That is because the words of the Form 7 plainly incorporated the content of the PEP report. The remedial work required by the Form 7 is explicitly stated to be the remedial work specified in both Annexure A and in the PEP report. 
  2. [44]
    The stated objective of the PEP report is to “identify the breaches to the lease terms and conditions and the extent of the Lessee’s make good and repairing onus under the terms of the Lease”.[29] However, the PEP report is largely designed to identify all of the work MXL would be required to perform on the termination of the lease – hence the expression ‘make good’.
  3. [45]
    That point can be demonstrated by the very first item listed in the schedule of ‘make good’ works: “Removal of tenants, fixtures and fittings: Remove fixtures and fittings complete (Cabinetry, blinds, fixtures and fittings) Make good to all disturbed surfaces.” That item of the PEP report relied on clause 17.2 of the lease. However, that provision is as follows:

The Tenant may and, if required by the Landlord, must remove from the Premises or the Building any property of the Tenant, including the Tenant’s Property,[30] at the expiration or sooner termination of this Lease. The Tenant must repair any damage caused to the Premises by the Tenant removing the Tenant’s Property. [emphasis added]

  1. [46]
    And so, MXL’s ‘make good’ obligation in clause 17.2 is only engaged if there is a termination of the lease and, on that termination of the lease, MXL chooses to remove its property or Thistle requires the removal of MXL’s property. On any view the lease had not been terminated as at 6 December 2023 when the Form 7 was served on MXL. There was therefore no factual basis for the engagement of clause 17.2 as at 6 December 2023. Therefore, the content of the PEP report in so far as it sought to demonstrate MXL’s obligation to ‘make good’ had no relevance to Thistle’s claim that, as at 6 December 2023, MXL was in breach of its repair or other obligations under the lease.
  2. [47]
    It is necessary to look at the PEP report in a little more detail. Some samples of the items in the PEP report’s schedule, entitled “Schedule of Make Good Works”, are as follows:[31]

Lease Covenant

Breach Complained of

Remedial Works Required

Total Cost

  1. Ground Floor

17.2

Removal of tenants furniture/fixtures/fittings

Remove furniture/fittings. Cabinetry, blinds. Make good all surfaces

$93

7.1

Paint/decorate walls, skirting, window frames/stairs/ceilings

Prepare and repair painted surfaces. Fill all holes. When complete apply undercoat & 2 coats acrylic paint

$5014

  1. Guest Rooms

17.2

Remove tenants furniture/fixtures/fittings

Remove furniture/fittings. Cabinetry, blinds. Make good all surfaces

$186

17.2

Remove tenants airconditioning appliances

Remove airconditioning, isolate electrical supply & removing cabling

$200

  1. Room 002

17.2

Remove tenants furniture/fixtures/fittings

Remove furniture/fittings. Cabinetry, blinds. Make good all surfaces

$186

  1. [48]
    There are literally hundreds of items like those, although many do actually refer to items requiring repair rather than items that are ‘make good’ items. That said, the ‘make good’ and repair tasks listed in the PEP report were substantial undertakings. The PEP report estimated that the cost of the work would be $402,583 and would involve a 13 week program.[32] That contrasts with the maximum period of 28 days remedying the breaches as specified in the text of the Form 7.[33] 
  2. [49]
    The result is that the Form 7 expressly required MXL to carry out the remedial work specified in both Annexure A and in the PEP report in circumstances where the PEP report comprehended ‘make good’ work not required by the lease and not able to be achieved in the time permitted in the Form 7.
  1. Can the Form 7 be Saved?
  1. [50]
    Thistle sought to save the Form 7:[34]

The PEP Solutions report of 16 June 2023 was merely a document referred to in the Form 7, to further particularise the works required by the Respondent to remedy the breaches identified in Annexure A to Form 7. Insofar as the PEP Solutions report of 16 June 2023 went beyond the requirements contained in Annexure A, it was irrelevant.

  1. [51]
    There are a number of problems with that brave rescue attempt. One is that it is not accurate to describe the PEP report as merely particularising the remedial works required by Annexure A. The PEP report requires literally hundreds of items to be remedied. Certainly, some items are in the nature of repairs.[35] But many others, such as those listed above, require ‘make good’ work, that is, stripping the rooms of the hotel of their fixtures and fittings and, in effect, restoring the hotel to its base shell.[36]
  2. [52]
    A second problem is that the Form 7 does not expressly say that the PEP report was merely intended as particulars of the work in Annexure A. And it cannot be inferred that that was the PEP report’s function. There is no obvious connection between the two documents. The items in Annexure A are not explained by items in the PEP report.[37]
  3. [53]
    The third problem is that, despite Thistle’s submission to the contrary, no commercially sensible interpretation of the Form 7[38] enables the lessee to simply ignore, as irrelevant, the PEP report to the extent that it goes beyond the requirements of Annexure A. The plain words of the Form 7 requires that MXL remedy the specified breaches by doing two things: executing the repairs particularised in Annexure A of the Form 7 and by performing the work listed in the PEP report. It would inflict some violence to a commercially sensible interpretation of the Form 7 to regard the notice as inviting the recipient to disregard the second of the two requirements as irrelevant to the extent that the requirements of the PEP report went beyond the requirements of Annexure A.
  4. [54]
    There is a fourth problem. Assume that MXL considered that, even though it had received the Form 7 which required MXL to execute both the Annexure A repairs and the work listed in the PEP report, MXL was entitled to take the rather adventurous step of disregarding the PEP report to the extent that its requirements went beyond the requirements of Annexure A. How would MXL identify the items of work listed in the PEP report which it was entitled to disregard?
  5. [55]
    A comparison of the two documents is a challenging exercise, if not an impossible one. On the one hand, Annexure A is exceedingly general. For example, the first remedy required of MXL in Annexure A, under the heading ‘Repair and Replacement’ is: “The Tenant must arrange and undertake all necessary repairs and maintenance to return the Premises to good working order and repair”. On the other hand, the PEP report is a very lengthy document that has been prepared on an entirely different basis with many items that may qualify as repairs but also many items that comprise ‘make good’ work such as removal of MXL’s fixtures and fittings.
  6. [56]
    The task of reconciling Annexure A and the PEP report so as to identify the extent that it goes beyond the requirements of Annexure A looks to be virtually impossible. A great deal of assessment and judgment would be involved. No two analysts reconciling the two documents are likely to arrive at the same view as to what could be safely disregarded as ‘surplus’ and beyond the scope of Annexure A. The ‘surplus’ is not said to be obvious. And, certainly, Thistle did not perform the exercise, or identify those items it said were beyond the scope of Annexure A.
  7. [57]
    Thistle’s submission that the Form 7 notice can be rescued by simply regarding parts of the PEP report as irrelevant raises some issues about the purposes of Form 7 notices and the law relating to Form 7 notices under s 124(1) of the Act.[39]
  1. Law on Form 7 Notices
  1. [58]
    The object of s 124 of the Act is not only to place restrictions on and give relief against forfeiture and re-entry by a lessor, but also to put the lessee in a position where the lessee is properly informed and can therefore make a commercially sensible election as to what to do next,[40] or to give the lessee an opportunity to consider its position and to formulate a response.[41] Importantly, of course, the purpose of the notice under s 124(1) is to give the lessee an opportunity to remedy any alleged breaches before the lessor exercises its right to terminate the lease.[42] A proper opportunity is not afforded to the lessee unless the lessee is alerted to the particular breaches on which the lessor proposes to rely and what the lessor requires in order to bring about the position where termination of the lease would not occur.[43] 
  2. [59]
    Thus, a Form 7 notice served pursuant to s 124(1) of the Act must not only allege a breach but must also describe the particular acts or omissions constituting the alleged breach and must indicate the acts of the lessee which the lessor would consider sufficient for the lease to continue.[44]
  3. [60]
    Errors in the notice which do not mislead the lessee are not necessarily fatal.[45] A question of fact and degree is involved, that being whether the notice identifies the breach and gives the lessee a reasonable opportunity to do what is required.[46] The degree of specificity will vary with the circumstances and with the facts already known or manifest to the lessee.[47]
  4. [61]
    And so, a Form 7 notice is not bad if the lessor fails to establish all the breaches set out in the notice, or if it includes matters that are not the responsibility of the lessee.[48] An example is Sylvester v Ostrowska[49] where the notice alleged breaches of a covenant to repair and breach of a covenant against subletting. The lease did not prohibit subletting. The notice survived. A notice also survived challenge in Blewett v Blewett[50] where the notice included work that the lessor was not entitled to require to be done under the lease.
  5. [62]
    On the other side of the line are cases like Re Automotive and General Industries Ltd v Bryson Industries (Vic) Pty Ltd[51] where particulars of a breach were held to be defective. This was because they did not sufficiently bring to the notice of the lessee the only justifiable ground of complaint, while specifying other grounds of complaint that were baseless. Similarly, the notice in Guillemard v Silverthorne[52] was held to be invalid. There, the notice set out:[53]
    1. the general covenant to repair contained in the lease;
    2. two further special painting covenants that the lease did not contain at all; and
    3. a schedule of work required to be done, some of which was not referable to the general covenant to repair.
  6. [63]
    With covenants to keep premises in repair, the notice must state the particular condition of the premises that the lessee was required to remedy.[54] But, of course, the notice need not, and should not, specify the means or method by which the condition is to be remedied.[55]
  1. The Law Applied
  1. [64]
    Here the Form 7 explicitly required MXL to both execute the repairs particularised in Annexure A and to perform the hundreds of items of work listed in the PEP report, many of which are ‘make good’ items in respect of which MXL had no responsibility.[56] A reasonable recipient of the Form 7 would had considerable difficulty reconciling the two documents and is not likely to have fairly understood what actions it was required to take, and which Thistle would consider sufficient, for the lease to continue.
  2. [65]
    I reject Thistle’s argument that a commercially sensible interpretation of the Form 7 required MXL to disregard those parts of the PEP report that went beyond the requirements of Annexure A. That was not a viable exercise. The recipient of a notice under s 124(1) ought not to be required to perform an analysis which reconciled two very different documents in order to discern what the notice required of the lessee.
  3. [66]
    In fact, Thistle’s argument that MXL should disregard those parts of the PEP report that went beyond the requirements of Annexure A rather starkly illustrates the problem. Thistle itself has not performed the reconciliation and identified those items that should be jettisoned. This is not a case where Thistle said, or was able to say, ‘simply ignore items A, B and C – they are obviously a mistake and plainly going too far’. Instead, Thistle’s argument requires MXL to perform an analysis to work out which of the hundreds of items in the PEP report can be regarded as outside the scope of the rather general contents of Annexure A.
  4. [67]
    Thistle argued that this is not a case of vague requirements which would invalidate a Form 7 as in Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service.[57] Instead, it was argued, this is a case of ‘too much information’. That argument would fly if the Form 7 notice did not expressly require MXL to both execute the repairs particularised in Annexure A and to perform the work listed in the PEP report. The argument might also have some force if the contents of the PEP report could be properly characterised as particulars of the requirements of Annexure A. Neither is true here.
  5. [68]
    Thistle also argued that the Form 7, despite the reference to the first PEP report, did give MXL reasonable certainty as to what it is required to do because:
    1. MXL did not complain that the works required by the Form 7 were uncertain;
    2. MXL responded to the issues in Annexure A and propounded reasons why MXL was not required to undertake the works identified in Annexure A;
    3. MXL stated that they undertook some of the maintenance issues contained in the first PEP report, but did not complete the maintenance works because of the excessive cost to complete the repairs;
    4. Ms Deng, the representative of MXL, knew what was required;
    5. Ms Deng chose not to undertake any works because of her view that MXL was not required to put the premises in repair because of the condition of the premises when MXL took over the lease.
  6. [69]
    There are two problems with those arguments. The first is that the argument is irrelevant. In my view, the test of whether the Form 7 complied with s 124(1) of the Act is essentially an objective one. Section 124(1) specifies the requirements of the Form 7 notice in objective terms, namely the right of re-entry or forfeiture is not enforceable unless and until the lessor serves a notice specifying the particular breach complained of and, if the breach is capable of remedy, requiring the lessee to remedy the breach. The words of s 124(1) do not suggest that the lessor’s obligation in drafting the notice has some subjective element.
  7. [70]
    Of course, the objective standard will take into account the fact that the notice is addressed to a person or entity who knows or ought to know the nature and condition of the premises. Thus, a statement in a notice might be sufficient to draw the lessee’s attention to the lessor’s complaints when such a statement might not be sufficient to do so in the case of a stranger.[58]    
  8. [71]
    However, that objective standard, in the factual context, does not make it appropriate for the court to embark on an inquiry as to whether the lessee was subjectively misled or confused by the notice.
  9. [72]
    The second problem with the argument is that, if it were proper for the court to embark on such a subjective inquiry, the evidence does not establish that MXL knew what was required. Ms Deng, MXL’s representative, expressly said that the Form 7 failed to specify the alleged breaches. She complained about the generality of the Form 7.[59] She referred to the requirements of the PEP report, presumably on the basis that MXL was obliged to respond to the requirements of the PEP report. There is no suggestion that Ms Deng regarded the PEP report as able to be disregarded – in whole or in part. In fact, Ms Deng’s reference to the requirements of the PEP report suggests that she has taken the Form 7 at face value and has interpreted it as requiring MXL to both execute the rather general description of repairs in Annexure A as well as the items of work listed in the PEP report. 
  10. [73]
    In my view, the notice is confusing and vague and requires a great deal of work that is not consistent with the lease. Section 124(1) is satisfied by properly and fairly identifying what the lessee must do to remedy the alleged breach. It is not satisfied by requiring the lessee to perform an analysis of a lengthy document, and to compare it with a very general document, in order to glean what rectification work is required.
  11. [74]
    The Form 7 here does not comply with the Act. For that reason, it is appropriate to refuse Thistle’s application for a declaration that the lease has been validly terminated.
  12. [75]
    That finding is sufficient to dispose of the application brought by Thistle. However, because other factual matters were argued, it is desirable that the court make some further findings.
  1. The Breaches Alleged – Maintenance Contracts
  1. [76]
    Although there were other breaches alleged in the correspondence, at the hearing there were three broad categories of breaches of lease that were pursued: breaches of clauses 5.8 (maintenance contracts), clause 6.4 (cleanliness) and clause 7.1 (good and substantial repair).
  2. [77]
    The first alleged category of breach can be disposed of quickly. Clause 5.8 provides that:
    1. MXL is obliged to enter into maintenance contracts with reputable contractors for the regular maintenance of mechanical services and firefighting services; and
    2. MXL was obliged to, on demand, provide Thistle with evidence of the currency of those contracts. 
  3. [78]
    Neither aspect was breached.  The evidence of Ms Meng, which I accept, was that those maintenance contracts existed. That fact was not contested. 
  4. [79]
    The question, then, is whether there was a demand for evidence of the currency of those maintenance contracts. Counsel for Thistle, rightly in my view, conceded that the Form 7 itself could not operate as a demand for evidence of the currency of the contracts. That is because the Form 7 operated as notice of an existing breach.  In any event, the substance of the complaint in Annexure A to the Form 7 is not a complaint of a failure to comply with a demand for evidence of currency but rather a complaint that the contracts were not in place. They were in place. Ms Meng’s evidence establishes that.
  5. [80]
    A possible demand for evidence of the currency of the maintenance contracts was the letter from Thistle’s solicitors to MXL on 19 April 2023 (discussed at the outset). That letter, after referring to the requirement for the lessee to enter into maintenance contracts for the mechanical services and firefighting equipment said: “To date our client has not received the required Maintenance Contracts. Please supply all records.” That is not consistent with the lease. Thistle was not entitled to “all records”. Thistle was entitled to demand evidence of the currency of the maintenance contracts.
  6. [81]
    As it happens, Thistle’s counsel did not argue that the 19 April 2023 letter comprised the demand for evidence of currency of the maintenance contracts. Possibly that was because the letter did not explicitly make that demand, or perhaps it was because that letter was rather stale by 6 December 2023.
  7. [82]
    Thus, no breach of clause 5.8 as at 6 December 2023 was established.
  1. The Breaches Alleged – Keeping the Premises Clean
  1. [83]
    The second category of breaches alleged is of a failure to comply with Clause 6.4 of the lease which required MXL to keep the premises clean.  The allegations in the Form 7 are exceedingly general:[60]

Breach

Remedy

  1. Failure to keep the Premises in a thorough and reasonable state of cleanliness.
  2. Failure to keep Premises hygienic and free of water.

The Tenant must arrange and undertake an immediate clean-up of the Premises to ensure it is in a state of thorough cleanliness and to ensure that there is no waste material on the Premises.

The necessary clean-up is to be undertaken within 14 days and must include, but not limited to:

  1. Ensuring that all food, food waste processing, storage and disposal areas are kept hygienic, free of smells and flies.
  2. Ensuring all common areas within the Premises are kept in a state of thorough cleanliness and both hygienic, free of smells and flies.
  3. Ensuring all rooms within the Premises are kept in a state of thorough cleanliness and both hygienic, free of smells and flies.
  4. Ensuring all service and utility areas within the Premises are kept in a state of thorough cleanliness and both hygienic, free of smells and flies.
  1. [84]
    No specific rooms or areas of the hotel are identified as being unclean in any particular way.  Thistle relies on the PEP report dated 16 June 2023.[61]  As explained, that PEP report is referred to in the Form 7 notice and a copy was attached to the Form 7.[62]
  2. [85]
    However, there are two problems.  One problem is that the PEP report does not specify the particular breach complained of.  The report does assert that:
    1. some unidentified rooms were in an unclean state; and
    2. some unidentified long term residents were storing excessive amounts of belongings; and
    3. some unidentified “general rubbish” had not been disposed of appropriately.[63]
  3. [86]
    The photographs attached to the first PEP report include a photograph of a toilet that is plainly unclean.[64]  But that illustrates the second problem.  The PEP report shows the state of the hotel as at the date of PEP’s inspection of the hotel on 5 May 2023.  That can hardly be relevant evidence of the cleanliness of the operating hotel some seven months later when the Form 7 was served on 6 December 2023.
  4. [87]
    During the hearing, counsel for MXL objected to the PEP report on the grounds of relevance.  I reserved my ruling on that objection. The PEP report is plainly relevant as part of the correspondence between the parties to the lease. It was referred to and physically attached to the Form 7 served by Thistle on MXL. However, the PEP report can be given no weight on the issue of the cleanliness of the hotel as at 6 December 2023.  As I have explained, the PEP report, which records what was observed at the hotel on 5 May 2023, cannot sensibly be regarded as helpful or cogent evidence of the cleanliness of the hotel some seven months later, on 6 December 2023.
  5. [88]
    The evidence does not enable the court to find that, as at 6 December 2023, any particular parts or rooms of the hotel were not in a thorough state of cleanliness.
  1. The Breaches Alleged – Good and Substantial Repair
  1. [89]
    The third broad category of breaches pursued by Thistle relies on clause 7.1 of the lease.  As explained above, that clause requires that MXL:

during the whole of the term of the Lease maintain and keep in good and substantial repair, working order and condition the Premises fair wear and tear excepted (having regard to the condition at the commencement of the Lease) …

  1. [90]
    Here, the breach and the remedy required by the Form 7 are as follows:[65]

Breach

Remedy

  1. 1.
    Failure to keep the Premises in good, proper repair.
  1. 2.
    Failure to keep the Premises in good  and proper working order.
  1. 3.
    Allowing the Premises to fall into  disrepair with evidence of:
  1. (i)
    Holes in the walls;
  1. (ii)
    Missing lessor components (sinks, electrical light fittings);
  1. (iii)
    General damage.

The Tenant must arrange and undertake all necessary repairs and maintenance to return the Premises to good working order and repair.

Such steps will include arranging and putting into place within a period of 28 days, all necessary Maintenance Contracts with reputable contractors approved by the Landlord (acting reasonably) for the repair of the Premises and in respect of:

  1. The holes in the walls;
  2. Any broken, cracked or damaged components within the Premises;
  3. All lighting (including but not limited to: faulty lights and tubes) within the Premises.
  1. [91]
    As can be seen, there is little by way of detail.  The holes in the walls are not identified. The missing sinks and missing light fittings are not identified. And it is difficult to know what is meant by the expression “General Damage”.
  2. [92]
    Importantly, the disrepair is alleged in a hotel that occupies four storeys and comprises a number of rooms. The requirement of the legislation is to sufficiently particularise the breach of the lease so that the lessee might reasonably understand, not merely what clause it is alleged has been breached, but also what is required to be done by the lessee to remedy the alleged breaches.[66]
  3. [93]
    Here Annexure A requires MXL to:
  1. (a)
    arrange and undertake all necessary repairs and maintenance;
  1. (b)
    take steps including ‘all necessary Maintenance Contracts with reputable builders’[67] who are to repair:
  1. (i)
    (unidentified) holes in the walls (of unidentified rooms);
  1. (ii)
    any broken, cracked or damaged components (not identified) within the hotel;
  1. (iii)
    all lighting – including faulty lights and tubes.
  1. [94]
    That detail is insufficient to identify what MXL must do to remedy the breach alleged.  In a four storey hotel, it is hardly sufficient to refer to ‘holes in the walls’ without even referring to a floor or room.  Similarly, it is insufficient to identify “damaged components” without saying what they are, let alone where they are in the hotel. And the requirements regarding lighting are illusive and vague.  That requirement seems to be that maintenance contractors are to be engaged for the repair of “all lighting”, presumably everywhere in the hotel, “including but not limited to” faulty lights and tubes at certain unidentified places in the hotel.  It is odd, to say the least, that MXL is required to repair “all lighting” when there is no allegation that all lighting is defective and in need of repair.
  2. [95]
    That lack of detail had a practical consequence. Ms Deng deposed to work having been carried out on the premises. She exhibited some relevant invoices for work on the premises. Five of those invoices were rendered after 5 May 2023 when PEP inspected the hotel. Presumably the invoices were rendered shortly after the work was done. Those five invoices can be summarised in this way:

Date of Invoice

Work

Amount charged

12/05/2023

Room lights and covers replacement

$18,855

16/05/2023

Repair leaking toilets, replace toilet water tanks, sinks, shower heads

$4,196

19/06/2023

Replace and repair carpet for 16 rooms

$10,780

29/06/2023

Replace and repair skirting boards

$8,959

21/09/2023

Replace window glass

$5,423

  1. [96]
    There are then a further four items that comprise invoices rendered in February 2024, that is, after the service of the Form 7 but before Thistle purported to terminate the lease on 7 March 2024.
  2. [97]
    The difficulty is that the court is unable to determine what items remained to be repaired when the Form 7 was served on 6 December 2023 and what items were not remedied after the Form 7 was served. There is a distinct lack of clarity.
  3. [98]
    An example can be given. Annexure A to the Form 7 refers to some broken glass or broken windows – without identifying the location in the hotel of the broken windows or glass.  Obviously enough the operator of a hotel will realise where broken windows are located. But different windows or glass may be broken and repaired at different times. Presumably the broken glass or windows referred to in the Form 7 are those that were observed on 5 May 2023 when PEP inspected the hotel. But Ms Deng says in her affidavit that “Windows were replaced”.[68] Ms Deng does not identify what windows were replaced but she does exhibit an invoice dated 21 September 2023 which records an expense of $5,423 incurred by the lessor for replacing window glass. Thus, the question is: was the broken glass or windows observed on 5 May 2023 repaired, or did that broken glass or windows remain untouched on 6 December 2023?
  4. [99]
    The lack of proper detail from both parties means that there is no basis for any factual finding that there was broken glass on 6 December 2023. Possibly the glass referred to in the Form 7 was the same glass as is referred to in the PEP report, and the same glass as was repaired and is referred to in the invoice exhibited to Ms Deng’s affidavit. Possibly they are different.
  5. [100]
    That is one example that demonstrates that the court is unable to make any factual findings about what items or parts of the hotel needed repair on 6 December 2023, let alone what items were then remedied within a reasonable time after that.   
  6. [101]
    The first PEP report does not assist in identifying what precise repairs were required as at 6 December 2023, and the court is unable to make a finding as to what repairs were required as at 6 December 2023.
  1. The Second PEP Report
  1. [102]
    A second PEP report was prepared and became part of the evidence. The second PEP report is dated 26 February 2024. The report records that PEP Solutions was contacted by Thistle’s solicitors on 12 January 2024 to provide a ‘Schedule of Condition Report’. There were then inspections of the hotel by PEP Solutions staff on 7 and 8 February 2024. The report records the instructions to PEP to prepare:

an independent expert report regarding the current status of the premises, with comments on the general state of the property and inclusion of any clarification as to the following specific issues:

1. Maintenance Contracts

2. Cleaning and Removal of Refuse

3. Behaviour of Occupants

4. Maintenance and repair of Premises; and

5. Alterations and Renovations.

In addition to the above issues, it was requested that we address all or any of the previous damage and/or issues outlined in [the first PEP report]…

  1. [103]
    The second PEP report runs to just under 400 pages. It comprises three pages of text outlining the instructions and the methodology, 10 pages stating whether ceilings, walls, floors etc were in good, fair or poor condition, 20 or so pages expressing opinions about the state of various parts of the hotel,[69] a copy of the letter of instruction, hundreds of photographs, and a 35 page schedule similar to the schedule in the first PEP report referred to in paragraph [47] above.  
  2. [104]
    The columns in that table have been altered. Relevantly the columns of the table are the same except that the “Total Cost” column has been replaced by a column that notes “Inspection Notes – Inspected 7 and 8 February 2024”. For all of the sample items in paragraph [47] above, the description is “N/A” presumably meaning “not applicable”. For other items there have been notes such as:
    1. “No works undertaken”; or
    2. “Repairs have been undertaken”.
  3. [105]
    A major problem with the second PEP report is that it really does two things. First, it reports on the overall condition of the hotel. On that aspect, it is not relevant for the court to be informed, for example, that the condition of the bathroom in room 310 is described as “Poor”.  Second, it records whether and how the premises has changed from the time of the inspection on 5 May 2023 to the time of the inspection on 7 and 8 February 2024.
  4. [106]
    None of that assists in establishing that any particular repair items were present at 6 December 2023, or whether any were remedied within a reasonable time from 6 December 2023. It hardly assists the court to be given a lengthy report like this and to fail to identify in submissions any specific items that are contended as specific breaches of the repair covenant.
  5. [107]
    In any event, s 124(1) of the Act is satisfied by properly and fairly identifying the breach that existed at the time of the Form 7 notice and what the lessee must do in order to remedy the alleged breach.[70]  As explained, s 124(1) is not fulfilled by requiring the lessee to perform an analysis of a lengthy document in order to glean from that document what the breaches are and what rectification work is required. Nor is the breach proved by tendering hundreds of pages of reports and saying, in effect, the breaches can be found in there.
  1. Conclusions
  1. [108]
    The Form 7 notice does not comply with s 124(1) of the Act. That means that the application for a declaration that the lease has been validly terminated must be refused. In any event, the evidence does not establish that the lessee, MXL was in breach of the lease as at 6 December 2023.

Footnotes

[1]  The building comprises a basement, ground floor and three upper levels.

[2]  Presumably this is a reference to credit assessment.

[3]  The invoices are exhibited to Ms Deng’s affidavit, some of which are discussed below.

[4]  These are the requirements of s 124 of the Act.

[5]  It is not entirely clear but the part in brackets may be read as applying to the “fair wear and tear” exception or to the requirement to keep in good and substantial repair, or possibly both.

[6]  These events will usually be covered by the lessor’s insurance: see the discussion in William Duncan, Commercial Leases in Australia (Thomson Reuters, 10th ed, 2024), [70.10].

[7]  Under cl 7.2 of the lease structural work was generally the responsibility of the lessor.

[8]  Robert Hay, Luke Virgona and Clyde Croft, Commercial Tenancy Law (LexisNexis, 5th ed, 2023), [10.8] (‘Commercial Tenancy Law’). The cases quoted as authority for that proposition include Proudfoot v Hart (1890) 25 QBD 42, 55 (‘Proudfoot’) and Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349, 355.

[9] Commercial Tenancy Law (supra) and Proudfoot (supra).

[10]  That is the Lease, cl 1.1.3. See also cl 1.2 which specifies that if there is any breach of the lease, Thistle can pursue MXL.

[11]  Further written submissions of MXL, [56].

[12]  And, of course, no agreement varying the lease is raised in the issues documents.

[13]  Or there may be a separate agreement by the parties, that is separate to cl 9(a)(ii), to suspend rent.

[14]  The Lease, cl 7.1 contains these two exceptions.

[15]  The Lease, cl 7.1(c).

[16]  Ibid cl 7.1(d) and 7.2(b).

[17]  See Ibid cl 9(a). The actual permitted use specified in the lease is: “Operation of a City Edge serviced apartment business from the Premises”.

[18]  See Ms Deng’s affidavit, DM13 (page 6 of 62). 

[19]  See Ms Deng’s affidavit, [34]-[37].

[20]  In particular, MXL does not seek relief from forfeiture under s 124(2) of Act.

[21]  Section 124(8) specifies that the prescribed form is Form 7.

[22]  Various time periods are specified up to “within 28 days”.

[23]  This list of nine clauses breached in the text of the Form 7 is inconsistent with the list of seven clauses said to have been breached in Annexure A. See the discussion below.

[24]  This understates the errors. The inclusion of cl 17.1, 17.2 and 17.3 in the text are not the only differences.

[25]  Thistle’s further submissions, [19].

[26]  [2007] QSC 394, [86] (a case referred to by counsel for Thistle). 

[27]  The authorities cited in support of this proposition were Clarke v Japan Machines (Australia) Pty Ltd [1984] 1 Qd R 404 and Ex Parte Whelan [1986] 1 Qd R 500.

[28]  See Thistle’s further submissions, [2].

[29]  This is in the introduction to the report on page 1.

[30]  The expression “Tenant’s Property” is defined as the fixtures, fittings, furnishings and equipment (if any) at any time installed in the Premises as specified in item 18 of Schedule 1. That item refers the reader to Schedule 4 which contains a lengthy list of furniture, fittings and equipment.

[31]  The examples in the schedule have been simplified for present purposes.

[32]  PEP report, pg 7.

[33]  The covering letter from Thistle’s solicitors specified 4 January 2024 as the final day for the remedial work – which is 29 days after 6 December 2023.

[34]  Thistle’s further submissions, [2].

[35]  For example, repair of windows and repair of damaged tiles.

[36]  Mr Upton, PEP’s representative, largely agreed that this was the basis of the PEP report: Transcript of the hearing, T1-28, line 15.

[37]  A very detailed analysis of both documents may disclose some overlap, but such an analysis would be a vast undertaking and contrary to the principle that the purpose of the Form 7 is to give the recipient a notice that enables the recipient to understand with reasonable certainty what she or he is required to do (see the discussion below).

[38]  The requirement to give Form 7 notices a commercially sensible construction is discussed in LexisNexis, Australian Tenancy Law and Practice (online at 21 October 2024) [2.6.280] (‘Australian Tenancy Law and Practice’), citing MLW Technology Pty Ltd v May [2005] VSCA 29, [78]-[82] and Lontav Pty Ltd v Pineross Custodial Services Pty Ltd [2011] VSC 278, [69]. The basis for both cases is the judgment of Lord Steyn in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, 767-71. Much earlier notices were required to be construed in a common-sense way: Fox v Jolly [1916] 1 AC 1, 23. The difference hardly matters here.

[39]  Section 124(1) has its equivalents in the other states and territories. There are minor differences. For example, only in Queensland and NSW is there a prescribed form for giving the notice.

[40] Commercial Tenancy Law, [18.6] citing Horsey Estate Ltd v Steiger and the Petrifite Company Ltd [1899] 2 QB 79, 91 and Chelfield Pty Ltd v Goldsea Pty Ltd; Re WC Pty Ltd [2003] 2 Qd R 243, [17].

[41] Primary RE Ltd v Great Southern Property Holdings Ltd [2011] VSC 242, [147].

[42] Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268, [308] (‘Macquarie International'). This case was extensively quoted an approved by Judd J in Primary RE Ltd v Great Southern Property Holdings Ltd [2011] VSC 242, [105] and that passage is also extensively quoted in Commercial Tenancy Law (supra), [18.6].

[43] Macquarie International, [309].

[44]  Ibid [323]. See also Harris v Thallon (1926) 26 SR (NSW) 456, 461.

[45] Australian Tenancy Law and Practice, [2.6.280] citing Cairns City Supermarkets Pty Ltd v Lightbrake Pty Ltd [2011] QCA 205, [27]. Whether the notice misleads is an objective test – see later discussion of this issue.

[46] Australian Tenancy Law and Practice (supra) citing Clarke v Japan Machines (Australia) Pty Ltd [1984] 1 Qd R 404, 413.

[47] Visser v Jacobs (1987) NSW ConvR 55-350, 57-164. See also Macquarie International, [323].

[48] Australian Tenancy Law and Practice (supra) citing Jolly v Brown [1914] 2 KB 109; Fox v Jolly [1916] 1 AC 1, 12, 14-5; and Mir Bros Projects Pty Ltd v 1924 Pty Ltd [1980] 2 NSWLR 907. 925.

[49]  [1959] 1 WLR 1060. The examples that follow are largely derived from the useful summary of the cases in Commercial Tenancy Law (supra), [18.6].

[50]  [1936] 2 All ER 188.

[51]  (2012) V ConvR 54-801.

[52]  (1908) LT 584.

[53]  This is a paraphrased version of the summary is Commercial Tenancy Law (supra), [18.6].

[54] Gerraty v McGavin (1918) 18 CLR 152.

[55]  Ibid 164-5; followed and quoted in Macquarie International (supra), [318].

[56]  MXL may later become responsible for the ‘make good’ items but it had no responsibility at the time of the notice on 6 December 2023.

[57]  [2010] NSWCA 268. This argument was put in Thistle further submissions, [28]-[29].

[58]  See Fox v Jolly [1916] 1 AC 1, 18, quoted with approval in Macquarie International (supra), [314].

[59]  Ms Deng’s affidavit, [15]. The complaint is about “merely setting out general principles of what the lease requires”. Ms Deng was not cross-examined about the contents of [15] of her affidavit and there was no objection to that paragraph.

[60]  This is a simplified and adapted version of the table in the Form 7.

[61]  For convenience, I will refer to this report as the “PEP report”. There is a second PEP report discussed below which I will refer to as the “Second PEP report”.

[62]  The parties agreed that the PEP Report was attached to and forms part of the Form 7. Thistle stated that the PEP report (although conceded as physically attached to the Form 7) should be regarded merely as a document referred to in the Form 7.

[63]  First PEP report, page 2.

[64]  PEP report, page 10, photo 11.

[65]  Again, this is a simplified and adapted version of the table in the Form 7.

[66]  See Sparta Nominees Pty Ltd v Orchard Holdings Pty Ltd [2002] WASC 54, [27], applying Gerraty v McGavin (1914) 18 CLR 152.

[67]  This assumes there were no such contracts – see the discussion above in relation to Clause 5.8.

[68]  Ms Deng’s April 2024 affidavit, [17].

[69]  Some parts of the hotel were unable to be inspected.

[70]  Of course, the manner in which the repair work is to be carried out need not and should not be specified.

Close

Editorial Notes

  • Published Case Name:

    Thistle Investment Pty Ltd v MXL Investment Pty Ltd

  • Shortened Case Name:

    Thistle Investment Pty Ltd v MXL Investment Pty Ltd

  • MNC:

    [2024] QSC 247

  • Court:

    QSC

  • Judge(s):

    Freeburn J

  • Date:

    21 Oct 2024

  • White Star Case:

    Yes

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349
1 citation
Jump To
Cite 1 - (1998) 44 NSWLR 349
Blewitt v Blewitt [1936] 2 All ER 188
2 citations
Jump To
Cite 1 - [1936] 2 All ER 188
Cite 2 - [1936] 2 All ER 188
Cairns City Supermarkets Pty Ltd v Lightbrake Pty Ltd [2011] QCA 205
1 citation
Jump To
Cite 1 - [2011] QCA 205
Chelfield Pty Ltd v Goldsea Pty Ltd[2003] 2 Qd R 243; [2003] QSC 40
1 citation
Jump To
Cite 1 - [2003] 2 Qd R 243
Clarke v Japan Machines (Australia) Pty Ltd [1984] 1 Qd R 404
2 citations
Jump To
Cite 1 - [1984] 1 Qd R 404
Cite 2 - [1984] 1 Qd R 404
Elsafty Enterprises Pty Ltd v Mermaids Cafe & Bar Pty Ltd [2007] QSC 394
2 citations
Jump To
Cite 1 - [2007] QSC 394
Cite 2 - [2007] QSC 394
Ex parte Whelan [1986] 1 Qd R 500
1 citation
Jump To
Cite 1 - [1986] 1 Qd R 500
Fox v Jolly [1916] 1 AC 1
3 citations
Jump To
Cite 1 - [1916] 1 AC 1
Cite 2 - [1916] 1 AC 1
Cite 3 - [1916] 1 AC 1
Gerraty v McGavin (1914) 18 CLR 152
1 citation
Jump To
Cite 1 - (1914) 18 CLR 152
Guillemard v Silverthorne (1908) LT 584
2 citations
Jump To
Cite 1 - (1908) LT 584
Cite 2 - (1908) LT 584
Harris -v- Thallon (1926) 26 S.R. (N.S.W.) 456
1 citation
Jump To
Cite 1 - (1926) 26 S.R. (N.S.W.) 456
Horsey Estate Limited -v- Steiger (1899) 2 QB 79
1 citation
Jump To
Cite 1 - (1899) 2 QB 79
Jolly v Brown [1914] 2 KB 109
1 citation
Jump To
Cite 1 - [1914] 2 KB 109
Lontav Pty Ltd v Pineross Custodial Services Pty Ltd [2011] VSC 278
1 citation
Jump To
Cite 1 - [2011] VSC 278
Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268
3 citations
Jump To
Cite 1 - [2010] NSWCA 268
Cite 2 - [2010] NSWCA 268
Cite 3 - [2010] NSWCA 268
Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd (1997) AC 749
1 citation
Jump To
Cite 1 - (1997) AC 749
MLW Technology Pty Ltd & Anor v May [2005] VSCA 29
1 citation
Jump To
Cite 1 - [2005] VSCA 29
Primary RE Ltd v Great Southern Property Holdings Ltd [2011] VSC 242
2 citations
Jump To
Cite 1 - [2011] VSC 242
Cite 2 - [2011] VSC 242
Projects Pty. Ltd. v1924 Pty. Ltd. (1980) 2 NSWLR 907
1 citation
Jump To
Cite 1 - (1980) 2 NSWLR 907
Proudfoot v Hart (1890) 25 QBD 42
1 citation
Jump To
Cite 1 - (1890) 25 QBD 42
Silvester v Ostrowska [1959] 1 WLR 1060
2 citations
Jump To
Cite 1 - [1959] 1 WLR 1060
Cite 2 - [1959] 1 WLR 1060
Sparta Nominees Pty Ltd v Orchard Holdings Pty Ltd [2002] WASC 54
1 citation
Jump To
Cite 1 - [2002] WASC 54
Visser v Jacobs (1987) NSW ConvR 5 5-350
1 citation
Jump To
Cite 1 - (1987) NSW ConvR 5 5-350

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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