In brief - Tenant fails in bid to seek relief under section 133F of Conveyancing Act

In Allsvelte Pty Ltd v Cassegrain Wines Pty Limited [2015] NSWSC 1370, the Supreme Court refused to allow a tenant to exercise an option to extend its retail lease for another three years due to the tenant's conduct throughout the original three-year lease and several "wilful" breaches by the tenant during the same time.

Cassegrain alleges that tenant breached some sublease provisions

The defendant, Cassegrain, leased the winery located at 764 Fernbank Creek Road, Port Macquarie, from Hastings Estate Pty Limited pursuant to a registered lease. In 2011, Cassegrain granted a registered sublease over the restaurant premises that form part of the winery to the plaintiff, Allsvelte. The sublease was for a period of three years with a three-year option. On 11 June 2014, Allsvelte purported to exercise the option.
In response, on 18 June 2014, Cassegrain served a notice pursuant to section 133E of the Conveyancing Act 1919 (NSW) specifying a number of breaches of the sublease by Allsvelte that it claimed disentitled Allsvelte from exercising the option. Allsvelte then commenced proceedings seeking relief under section 133F of the Conveyancing Act against the effect of the alleged breaches. As a result, the term of the original sublease was extended in accordance with section 133G of the Conveyancing Act.
Subsequently, Cassegrain served two notices under section 129 of the Conveyancing Act alleging that Allsvelte was in breach of a number of provisions of the sublease.

Late payment of rent found to meet section 133E standard

The court found that only one of the nine alleged breaches was sufficiently accurate and detailed. The court expressed that a section 133E notice "must be specified with sufficient particularity to enable the lessee to make a decision whether or not to seek relief under s 133F and to seek that relief if it decides to do so..." (at [58]). The only alleged breach that met this standard was the one in relation to late payment of one month's base rent.
The court specified that in any proceedings for relief under section 133E of the Conveyancing Act, which specifies that the tenant's breach of the relevant obligation and stating that the landlord proposes to treat the breach as preventing the tenant from exercising an option, the burden of proof of a breach lies upon the landlord, while the burden of demonstrating that relief should be granted, assuming that the alleged breaches are made out, lies upon the tenant.

Supreme Court considers tenant's relationship with landlord and its "wilful" breaches

The late payment breach that the court found to be sufficient was still relatively minor and was found to be "clearly inadvertent". However, the court did not grant relief under section 133F to allow the lease to continue because:

  • The relationship between the landlord and the tenant had clearly deteriorated, and it seemed likely that they would not cooperate in the future.
  • The tenant "wilfully" failed to provide relevant records, which included failing to provide the landlord with sales records.
  • The tenant "wilfully" failed to follow rules that the landlord wished to enforce under the terms of the lease.

Parties to a lease must understand their contractual obligations

The lessons for landlords and tenants from this case are that it is important to ensure that formal lease documents are drafted correctly, and that both parties completely understand the agreement and its contractual obligations.

This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2024.

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