711 Hogben Pty Ltd v Anthony Tadros – Relief Against Forfeiture and Costs [2022] NSWSC 1653
After a seven year litigation battle with their landlord, during which its lease was terminated, commercial tenants were granted relief against forfeiture.
In 2015, the tenants entered into an agreement to lease premises to operate a child care centre. The lease became effective in October 2020 and rent began to accrue. During protracted litigation concerning the terms of the lease and delays in landlords works, the landlord terminated the lease for failure to pay rent.
Prior to the hearing on relief against forfeiture, judgment was entered against the landlord for damages and interest totaling $860,128 for failure to carry out landlord’s works to render the premises fit for use. This amount represented at least two years’ rent and took into account by way of reduction all rent and outgoings that had not been paid up until the end of 2022.
The tenants argued that their failure to pay rent was caused by the landlord’s breach, and in support of the application for relief against forfeiture, offered to pay rent and outgoings from the beginning of 2023.
His Honour Justice Hammerschlag CJ in Eq noted that the Court rarely refuses relief against forfeiture where the lessor can be put in the same position as before the forfeiture. This was distinguished from situations where relief may be withheld when a tenant cannot pay or may be reasonably be expected to become unable to pay future rent.
The landlord argued that the tenants had not yet obtained an occupation certificate or service approval, so could not trade their child care centre. His Honour held that this did not matter, as future rent was to be paid in any event. The risk of a failed business lay with the tenants. In any event, it was noted that the landlord contributed to the delay in obtaining the occupation certificate and service approval by its own actions, including the costly distraction of the protracted litigation in which it had engaged and lost.
The landlord’s submission that the inability to trade the child care centre would lead to an inability to pay rent and outgoings was given short shrift. If the landlord met the verdict the tenants would have resources to fit out the centre and pay rent and outgoings.
Importantly, an application for deferral of the tenants’ obligations under the lease until payment of the verdict was rejected as it conflicted with the no set off clause in the lease.
Relief against forfeiture was granted and the tenant was awarded costs.
Finn Roache have significant experience with relief against forfeiture, and some of the leading case authorities are matters we have run (including case law used in the judgment discussed above). If you are a commercial or retail tenant who is in dispute with your landlord and are facing a termination of your lease, Finn Roache can advise and assist you.