Musico Corporation Pty Ltd v Master Truck Service Pty Ltd

1. [1]

   The proceedings concern the termination of a commercial lease. The plaintiff, Musico Corporation Pty Limited (“MCPL”) is the landlord. The first defendant, Master Truck Services Pty Limited (“MTS”) is the tenant.

2. [2]

   The lease has not been registered. Strictly speaking it is therefore ineffective at law. The case has, however, been conducted on the basis that it is enforceable as if it were a valid legal lease, under the rule in Walsh v Lonsdale (1882) 21 Ch D 9.

3. [3]

   The subject property is a block of land approximately 6600 m2 in size at Elizabeth Drive, Kemps Creek, on Sydney’s western outskirts. The area was originally rural but some of the properties on Elizabeth Drive have been developed for light industrial and other commercial purposes. The land in question, however, retains a rural zoning. Before last year it was undeveloped apart from a small one-storey building on the south-eastern corner near the road.

4. [4]

   The landlord company, MCPL, is controlled by Ms Immacolata (known as Emma) Musico, who is the sole director. In the management of the property, she is assisted by her son Giuseppe (Joe) Musico.

5. [5]

   The tenant company, MTS, is, it seems, controlled by Mr Fatek Azeez. He, Mr Fahad Azeez and Mr Rakan Najeed Hirmiz Hirmiz, are guarantors of MTS’ liabilities under the lease. They are the second, third and fourth defendants. They are commonly represented with MTS and, unless it is necessary to do so, I will not refer separately to them as parties.

6. [6]

   As its name suggests, the business of MTS appears to be the provision of maintenance services to the trucking industry. MTS or an associated entity already operates a truck service centre at property near the Kemps Creek land.

7. [7]

   Before the subject lease was granted, the land was leased by Muscio to Athena Truck Services Pty Limited (“ATS”). ATS is also a company associated with Mr Azeez. The lease commenced on 1 August last year. After a few months, following negotiations between the parties, that lease was replaced by the subject lease to MTS, which is in substantially the same form as the ATS lease.

8. [8]

   The subject lease was dated 4 December last year. It consisted of a Real Property Act 1900 form of lease with an annexure containing a “commercial terms schedule”, and a “commercial lease document” consisting of 30 clauses.

9. [9]

   The commencement date of the subject lease was specified as 1 August last year, the same commencement date as the ATS lease. The term was four years, with a four year option. The initial rent was $152,000 plus GST per annum. The specified Permitted Use was tyre fitting.

10. [10]

    Following negotiation of the ATS lease, Mr Azeez had a building erected on the Kemps Creek property for the purposes of his truck services business. It is a large shed-type structure. The shed features, at the southern end, a series of bays suitable for tyre fitting and other mechanical services. At the northern end is a truck washing facility which includes a large drainage pit connected to drainage pipes. In front of it is an extensive paved area giving access to Elizabeth Drive.

11. [11]

    Work began on the shed during the ATS lease. There is some dispute in the affidavit evidence about whether the works were completed before the subject lease was granted. Council records referred to below suggest that work on the shed was still being completed as at 4 December last year, the date on which the subject lease was granted.

12. [12]

    The shed appears to have been completed at the end of last year or early this year. On the top of it is a prominent sign which runs the length of the building frontage. In the middle the signage indicates “Master Truck Services”. On the western side, above the bays which I have described, appears the word “tyres”. On the eastern side, above the truck washing facility, are the words “truck wash”.

13. [13]

    Set out below are photographs taken on 14 May this year showing the building, as well as the pre-existing smaller building which has also been decorated with “Master Truck Services” signage.

14. [16]

    The dispute which led to these proceedings appears to have been precipitated by action taken by the local authority, Penrith Council. No planning approval for the erection of the building or the use of the premises as a truck services facility was obtained. The Council issued a stop work order followed by an order requiring that the shed be demolished.

15. [17]

    These regulatory actions became the subject of correspondence between solicitors for MCPL and solicitors for MTS. Through its solicitors, MCPL issued formal notices of breach of various terms of the lease. Further correspondence ensued, but evidently those managing MCPL’s affairs considered the response unsatisfactory. A formal notice of termination was issued on 7 April this year. Possession was required by 14 April.

16. [18]

    That deadline passed and MTS remained in occupation. The proceedings were commenced on an urgent basis by a statement of claim on 9 May.

17. [19]

    In the statement of claim MCPL claimed a declaration that the lease had been validly termination on 7 April; an order for possession; damages in the form of mesne profits for trespass after that date; and damages for breach of contract. Those damages included the cost of demolition of the shed (later estimated in a quantity surveyor’s report to be more than $10 million).

18. [20]

    A cross-claim was filed for MTS and the guarantors. The basic allegation in the cross-claim was that the construction of the shed and the use of the premises as a truck wash had expressly or impliedly been authorised by representatives of MCPL. Relief was sought by way of estoppel or under the Australian Consumer Law (Competition and Consumer Act 2010 (Cth), Sch 2), the effect of which, if granted, would have been to prevent MCPL from terminating the lease on account of those matters.

19. [21]

    By their defence, MTS and the guarantors disputed the validity of the notice of termination. Their allegation was that the breaches alleged in the notices of breach had not been established. Alternatively, relief was sought against forfeiture of MTS’ leasehold interest. Strictly speaking, the application for relief against forfeiture is a distinct claim of relief, rather than merely a defence, and should have been advanced by way of cross-claim. No point, however, has been taken about this.

20. [22]

    A few days after commencing the proceedings, MCPL obtained an interlocutory injunction from Hammerschlag CJ in Eq. The order relevantly provided:

21. [23]

    The demolition order was later revoked, at least for the moment. But, so far as the evidence goes, planning permission for MTS’ business has not been obtained.

22. [24]

    There is no dispute that, following the notice of termination, and indeed following orders made by Hammerschlag CJ, activities continued at the property. Numerous photographs in evidence (starting with the ones reproduced at [13] above) show the doors of the tyre fitting bays and the truck wash bay open, with trucks parked outside and workers apparently going about their business.

23. [25]

    On MCPL’s behalf it was contended that these activities contravened the orders made by Hammerschlag CJ and amounted to contempt. On 25 July, a notice of motion was filed for MCPL applying to have MTS dealt with for contempt. That application was resisted on the ground that, among others, that the activities did not involve conducting or operating “a commercial enterprise” for the purposes of order 1(a).

Claims for determination

1. [26]

   The proceedings were expedited. The trial was fixed to take place on 29 September. The contempt motion was also listed, on the footing that the Court would be asked to find MTS guilty of contempt with the question of penalty to be dealt with at a later stage.

2. [27]

   In the course of opening, both the contempt application and MTS’ cross-claim were abandoned. I made orders dismissing the contempt motion and the cross-claim, in each case reserving costs. I also decided to defer considering any questions of damages until I determined the validity of the notice of termination and, if the termination proved to be valid, the application for relief against forfeiture.

Validity of termination

1. [28]

   Initially, counsel for MCPL relied upon a failure to rectify alleged breaches of several different terms of the lease. But in final submissions counsel focused on the use of the premises.

2. [29]

   Use of the premises was dealt with in cl 10 of the lease. That clause relevantly provided (emphasis added):

3. [30]

   It was common ground that no consent to the use of the property for truck washing (or for any other purpose apart from tyre fitting) had been obtained from MCPL for the purposes of the lease. Furthermore, no development consent for the carrying on of tyre fitting (or any other truck servicing activities) at the property had been obtained from Penrith Council.

4. [31]

   As already mentioned, there is no dispute that use of the property, in the general sense of the word, continued after the notices of breach were issued, up to (and in fact beyond) the date of the termination notice. The order made by Hammerschlag CJ spoke of the conduct of a “commercial enterprise”, but, on the face of it, the words of cl 10.1(1) were wider and the prohibition extended to any use apart from the Permitted Use.

5. [32]

   Counsel submitted, however, that it did not follow that MTS had been in breach of its obligations at the time the termination notice issued (or is now in breach). Counsel submitted that cl 10.1(1) should be read as a prohibition which applied to “any commercial or business purpose” apart from the Permitted Use.

6. [33]

   In support of this contention, counsel relied on the fact that cl 10.1 appeared in a set of terms which were described as “commercial lease” terms and that the Permitted Use was defined in a schedule defined as the “Commercial Terms Schedule”. Counsel also pointed to cl 10.2(1). Counsel submitted, as I understood him, that in referring to use of the premises the parties must have had commercial, or business use in mind.

7. [34]

   I asked counsel whether his argument effectively involved the implication of words into the lease, and, whether, if so, it was necessary for the putative implication to satisfy the conditions laid down in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283 for the implication of a term in a commercial contract. As I understood his response, counsel accepted that the answer was yes.

8. [35]

   One of the BP Refinery conditions is that the putative term should be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it. In my view that is plainly not the case here. It would remain perfectly possible for MTS to exploit the property in the manner contemplated by the lease and operate a tyre fitting business on the property, having obtained the necessary planning permission to do so. An inability to use the premises for some other purpose which was not a “commercial or business” purpose might be an inconvenience to MTS, but it would be no more than that. In no sense would it render the lease unworkable.

9. [36]

   It follows that the implication for which counsel for MTS contended cannot be made. MTS’ defence fails for this reason alone. But even if one ignores the criteria required for implication, and treats the question as solely one of interpretation of cl 10.1(1), the same result follows.

10. [37]

    In my view the language of clause 10.1(1) is clear. It prohibited the tenant from using the premises for any purpose other than that specified in the lease (or later agreed by the landlord). The width of the prohibition is emphasised by the express reference to use of any part of the premises as well as the whole. It is also emphasised by the reference to the tenant permitting such use as well as engaging in the use itself.

11. [38]

    In its ordinary and natural meaning, “use” of land is a wide term which covers all types of activities on the land, whether carried out for commercial purposes or not. There is no warrant whatsoever for supposing that the parties intended that it would be open to the tenant to carry on any other activity at the premises so long as it did not do so for “commercial” or “business” purposes. No doubt there could have been questions about the extent to which some other activities, which, standing alone, would not have fallen within the Permitted Use, might have been permissible as part of, or ancillary to, that use, but such questions do not arise in the present case.

12. [39]

    The considerations advanced by counsel do nothing to displace this view. It may be accepted that the lease described itself as a “commercial” lease. That was a commonplace expression, given that the property was commercial, as distinct from residential, in character. The Permitted Use was likewise commercial in nature. But it by no means follows that uses other than for that purpose were necessarily confined to “commercial” or “business” uses.

13. [40]

    Clause 10.2(1) does not support counsel’s argument either. The clause cast a positive obligation on the tenant to use the property for the Permitted Use. No doubt the explanation for this was that it was in the landlord’s interest, in view of ultimately having to re-let the property, that reputable commercial activity should take place there. True it is, as counsel submitted, that this did not necessarily prevent other non-commercial activities taking place so long as they did not interfere with the conduct of the Permitted Use business. But it said nothing about whether, and the extent to which, such other uses would be permissible.

14. [41]

    I should say that I am far from satisfied that, even if the words “commercial or business” were read into clause 10.1(1) as counsel contended, breach would not have been established. There are suggestions in the evidence that the presence of trucks and workmen at the property could be explained as some form of overflow from Mr Azeez’s other truck service centre. There are also suggestions that the trucks belonged to entities associated with Mr Azeez, members of his family or acquaintances, although this was a matter which was very much placed in issue by counsel for MCPL. Overflow use in aid of another business and use for servicing commercial vehicles such as trucks, might well be characterised as “commercial”, or at least “business” use, even if it could not be proved that money had changed hands.

15. [42]

    But on the view that I have taken it is unnecessary to consider these issues further. I am satisfied that at the time the termination notice was issued, MTS was in breach of cl 10.1(1) of the lease. It follows that the notice of termination on 7 April was valid. MCPL is prima facie entitled to possession of the property and damages for trespass and breach of contract, subject to the application for relief against forfeiture to which I now turn.

Relief against forfeiture

1. [43]

   For the purpose of this part of the case, it is necessary to say something more about the facts. I will then address the parties’ submissions in the light of the evidence.

2. [44]

   In the course of the initial negotiations for a lease for ATS in 2023, an “application to lease” form was signed by Mr Azeez. It required the applicants to “provide full details of usage and/or products to be sold from this site”. The response given on the form was “Tyre fitting and replacement / selling tyres”. The form contained a further section titled “Terms”, with another form field requiring that the applicants describe “Usage”. The response in that field was “Tyre fitting and replacement”.

3. [45]

   By October 2023 the parties had negotiated a lease, and draft heads of agreement were sent by Mr Vincent Stevens, an estate agent acting for MCPL, to Trump Lawyers, a law firm acting for ATS. The document included a section titled “Terms and Conditions”. One of the terms was listed as “Usage: Tyre fitting”.

4. [46]

   It seems that the heads of agreement may not have been signed, but the parties nevertheless proceeded with the deal. Nine months later, on 10 July 2024, a formal lease was executed between MCPL and ATS. As already noted, the lease commenced on 1 August 2024. It was later replaced by a lease to MTS, which was executed on 4 December 2024, and covered a larger area of land at a higher rent. The remaining terms of the MTS lease, however, appear to have been the same as those in the ATS lease.

5. [47]

   Work on the shed appears to have begun soon after the lease to ATS commenced. Mr Azeez retained Mr Aram Odesh, an architect, to undertake the design work.

6. [48]

   The plans initially drawn up by Mr Odesh and submitted to Ms Musico for her approval indicated that the shed was to be used for truck washing. On 27 August, she sent an email to Mr Stevens, writing:

7. [49]

   Mr Azeez then commissioned a new set of plans. On 31 August, he was sent an email by Mr Odesh with the adjusted plans attached. The email from Mr Odesh stated:

8. [50]

   Despite her reservations about the work having been commenced, Ms Musico provided an approval on MCPL’s behalf, dated 1 September. The approval stated:

9. [51]

   Ms Musico nevertheless remained concerned about the lack of approval for the construction works. On her instructions, Mr Stevens sent the following email to Mr Azeez on 2 October:

10. [52]

    Despite this email, construction work on the shed, including the truck washing bays, appears to have continued.

11. [53]

    The works came to the attention of the Penrith City Council. On 5 December 2024, the Council issued an “Emergency Development Control Order”, requiring MTS to “immediately” “cease all construction works at the premises”. The order stated that the Council had conducted investigations which revealed that “works had commenced in contravention of the [Environmental Planning and Assessment] Act”.

12. [54]

    In the Order, the Council included a section headed “Reasons for Emergency Order”, which contained:

13. [55]

    Work on the shed appears to have been completed by the end of December 2024, and the facilities began to be used.

14. [56]

    On 7 February 2025, the Council issued a further Development Control Order, which required MTS to:

15. [57]

    On 12 February, two Council officers, Lisa Hughes and Chris Manuel, attended the property to undertake an inspection. They spoke to the manager on site, and inspected the premises in detail, including the truck wash bays and the waste disposal systems. Later that day, Mr Manuel issued a “Direction to take preventative action” on behalf of the Council.

16. [58]

    The prevention notice stated:

17. [59]

    On 13 February, Mr Azeez called Mr Manuel to discuss the property. A file note of the conversation made by Mr Manuel is in evidence. It records:

18. [60]

    On 17 February, a development application (“DA”) was submitted on behalf of MTS for approval of the shed which had been constructed. It was apparently submitted by Mr Odesh’s firm. The application however sought approval for a “proposed shed”, when the shed had already been constructed. On this ground the Council declined to entertain the application, and it was returned without approval the following day.

19. [61]

    On 3 March, Mr Manuel had a conversation over the phone with Mr Azeez, which he recorded in a file note the following day. According to the file note, following a reference to the Prevention Notice, the conversation turned to the lack of approval for MTS’ activities at the premises:

20. [62]

    Meanwhile, on 28 February, MCPL’s solicitors had served a notice of breach of covenant on MTS via an email to Trump Lawyers. This included allegations that MTS was in breach by:

21. [63]

    Item “b” above was allegedly a breach of cl 10.1, which I have already set out above at [27], and “a” was allegedly in breach of cl 12.2, which reads:

22. [64]

    The breach notice required MTS to stop using the premises immediately, remove all signage on the premises referring to “Truck Wash”, deliver a copy of the DA which had been submitted on 17 February 2025, provide evidence of compliance with Council directions, and obtain requisite approvals to conduct the Permitted Use of the premises.

23. [65]

    On 4 March, Trump Lawyers replied to the notice of breach. Alleged breaches “a” and “b” were denied. The letter stated:

24. [66]

    By this time, as noted in Trump Lawyers’ letter, MTS had retained the services of Mr Pepping. He concluded that it was necessary to submit both a new DA to obtain authorisation for the intended use of the premises and an application for a Building Information Certificate (BIC) to regularise the construction of the shed.

25. [67]

    Mr Pepping is said to have submitted a new DA on 4 March, but it is not in evidence. In support of the application for a BIC, Mr Pepping wrote to the Council on 12 March:

26. [68]

    On 17 March, Mr Manuel and Ms Hughes again attended the property with other Council officials. Mr Manuel’s file note dated 18 March 2025 records that, following the inspection:

27. [69]

    On 20 March, a solicitor acting for the Council sent an email to MTS which stated:

28. [70]

    On 27 March, MCPL’s solicitors served a second Notice of Breach on Trump Lawyers. The alleged breaches included:

29. [71]

    The Notice continued:

30. [72]

    On 1 April, Trump Lawyers responded to the Notice, stating:

31. [73]

    That same day, the Council sent a “Notice of Intention to Serve a Development Control Order” to MTS, indicating that the Council was intending to issue a development control order requiring the demolition of the shed.

32. [74]

    On 2 April, an application for a BIC and a DA were formally submitted to the Council by Mr Pepping. It is unclear on the evidence before the Court whether these were the same applications referred to at [65] above, and were only submitted after a delay, or whether they were fresh applications.

33. [75]

    As already noted, on 7 April MCPL’s solicitors served the Notice of Termination on MTS.

34. [76]

    On 23 April, the BIC application and the DA were formally accepted by the Council for lodgement. Thereafter, they proceeded to the assessment stage. But, on 21 May, Hannah Vousden, a development assessment planner for the Council, emailed Mr Pepping, stating:

35. [77]

    A file note of Sarah Hall, a senior development compliance officer for the Council, dated 29 May, recorded:

36. [78]

    On 18 June 2025, Ms Vousden sent an email to Mr Pepping in which she stated:

37. [79]

    There is no evidence about the further progress of the DA (or the application for a BIC). Presumably those applications were withdrawn or refused. Meanwhile, on 14 May, the Council had served a further Development Control Order requiring the demolition of the shed.

38. [80]

    On 21 May, Ms Hughes wrote to MTS to indicate that the Prevention Notice had been complied with, that no further action was required under it, and that that matter would be closed. The Development Control Order requiring demolition of the shed was later revoked, but communications from the solicitors for MCPL indicate that this “revocation” was effectively a stay pending the outcome of the present proceedings. There is no evidence as to the status of the other Development Control Orders, or about whether any further action has been taken by the Council in pursuing the foreshadowed Class 4 proceedings.

39. [81]

    In his affidavit evidence, Mr Azeez claimed that from the outset he had disclosed to the Musicos that he wished to operate a truck wash on the subject land. He deposed that he had an understanding was that it was only a matter of time before the rural zoning would be changed, and that when that occurred the Permitted Use under the lease would be changed so as to include truck washing as well as tyre fitting.

40. [82]

    Mr Azeez also deposed that the Musicos were aware of the work on construction of the shed being undertaken and made no complaint. Indeed, he claimed that Mr Musico gave him a go-ahead and suggested that it was better not to obtain approval in advance, but rather to obtain a BIC after the works had been done. Mr Azeez further claimed that Mr Musico took a close interest in the works, and agreed, on MCPL’s behalf, to pay for some of them.

41. [83]

    Mr Azeez deposed that the Musicos only expressed concern about the works and the lack of approval after the Council took action. His understanding was that the breach notices were only issued on MCPL’s behalf to placate the Council and did not have to be complied with. He claimed that he was shocked when the formal Notice of Termination was issued.

42. [84]

    Affidavits were filed on behalf of MCPL from Ms Musico, Mr Musico, and Mr Stevens, which flatly denied Mr Azeez’s allegations. According to those affidavits, what actually happened was that Mr Azeez planned to get approval for a rural shed, and then to operate the tyre fitting business under a “rural enterprise” approval. Both Mr Musico and Mr Stevens deposed that Mr Azeez expressly agreed that he would be responsible for obtaining all of the necessary consents to operate any business which he wished to operate.

43. [85]

    In cross-examination counsel for MCPL asked Mr Azeez about the Permitted Use specification which appeared in the lease application and the heads of agreement:

44. [86]

    Mr Azeez also emphasised that he did not have a full understanding of the documentation he was signing, and stated that he relied on discussions with Mr Stevens and his lawyers:

45. [87]

    Mr Azeez maintained that, despite the documents not showing anything of the kind, there were extra-contractual agreements that a truck wash would be permitted, informally from the outset and then formally later:

46. [88]

    Mr Azeez also claimed that he had difficulty understanding contractual principles due to language and cultural barriers:

47. [89]

    Mr Azeez was cross-examined at some length on the Council file notes. His evidence was not always easy to follow. For instance, when asked about Mr Manuel’s file note of the conversation on 13 February 2024 ([57] above), he gave the following evidence:

48. [90]

    When asked about the breach notices he had received from MCPL, Mr Azeez stated that he was reassured at the time by Mr Stevens and by his lawyers that he could effectively ignore the notices:

49. [91]

    Mr Azeez was also directly asked about whether he had been honest throughout his dealings with MCPL and the Council, both directly and through his lawyers:

50. [92]

    The cross-examination left me with an unfavourable impression of Mr Azeez’s credibility. His claims that the Musicos agreed for him to use the premises as a truck wash flew in the face of the documentary evidence. As the cross-examination on this issue continued, Mr Azeez’s evidence became less and less coherent. It gave every impression of being made up on the spur of the moment.

51. [93]

    I found the suggestion that Mr Stevens told Mr Azeez that the breach notices were only to keep the Council of the Musicos’ back, and they did not need to be complied with, particularly absurd. It makes no sense. The Council was taking action against MTS, not MCPL. The breach notices involved the exercise of MCPL’s own contractual rights under the lease. They had nothing to do with the Council.

52. [94]

    I am not prepared to accept what Mr Azeez said on a factual level, over the denials by the Musicos and Mr Stevens. In the end, I did not understand that counsel for MTS was really inviting me to do so. As already mentioned, the cross-claim was not pressed. Given the documentary evidence to which I have referred that is hardly surprising.

53. [95]

    Mr Azeez’s evidence about his dealings with the Council officers, as recorded in their file notes, was also unimpressive. I thought overall that his evidence on this subject was evasive.

54. [96]

    Counsel for MTS sought to play down the file notes by observing that the Council officers had not themselves been called as witnesses. He also described the record of conversations between them and Mr Azeez in the file notes as “impressionistic”.

55. [97]

    I do not agree. The file notes were tendered as business records. They were not, and could not have been, the subject of objection. The suggestion that they are for some reason of lesser weight than Mr Azeez’s testimony should be firmly rejected. They may not have purported to record the whole of the conversations verbatim, but there is no reason to doubt their overall accuracy.

56. [98]

    The notes reflect little credit on Mr Azeez. Apparently, he was bent on advancing his commercial objectives, by any means he considered necessary, and irrespective of MTS’ legal obligations. The whole problem arose from Mr Azeez’s decision to embark on the building of the shed and the opening of his truck wash business without having secured the necessary planning permission. Against this background, his attitude towards the Council officers who had to deal with him was breathtakingly arrogant.

57. [99]

    For Mr Azeez to offer the excuse that he was inexperienced and unfamiliar with the business culture in Australia was unconvincing. He at all times had solicitors to advise him. He certainly took no notice of the advice which he received (for free) from the Council officers. Instead, he simply ignored everything he was told by them which did not suit what he wanted to do.

58. [100]

    Similar observations apply to Mr Azeez’s correspondence with the Musicos in response to the breach notices. By his own admission in cross-examination, his claim in response to the first breach notice that he was conducting a rural services business at the premises was untrue. In fact, he had made the same statement to Mr Manuel of the Council on the previous day, and had been told that it was “extremely incorrect”. Even if it had been true, it would not have fallen within the Permitted Use under the lease.

59. [101]

    In his response to the second breach notice, Mr Azeez claimed that “commercial” activities at the premises had ceased, although in fact truck-related activities were still going on. Although counsel has advanced an argument before me that this did not contravene the Permitted Use provisions in the lease, that would appear to have been an argument developed by counsel for the purposes of these proceedings. There was no evidence that it had occurred to Mr Azeez or his lawyers at the time he was responding to the second breach notice. In any event I am not prepared to accept, merely on Mr Azeez’s say-so, that “commercial” activities had in fact ceased at that point.

60. [102]

    Overall, the evidence that Mr Azeez gave to the Court appeared to be no more candid or reliable than what he had said to the Council or to the Musicos. I was not satisfied that he was telling me anything more than what he thought he needed to say in order to advance his commercial interests.

61. [103]

    There was no dispute between the parties as to the principles to be applied in determining MTS’ application for relief against forfeiture. There are two, or possibly three, bases on which the jurisdiction may be exercised: see Dyson Heydon, Mark Leeming, Peter G Turner, Meagher, Gummow & Lehane's Equity Doctrines & Remedies (5th ed, 2014, LexisNexis) (“MGL”) at [18-250 - 18-265]. But counsel relied exclusively on the first, stated by the learned authors as: “If the forfeiture is meant to secure the performance of a primary stipulation, then prima facie it is a forfeiture against which equity will relieve. Provided that compensation can be made to the party otherwise entitled to the benefit of the forfeiture, relief will generally follow.”

62. [104]

    The parties accepted the principles laid down by Lord Wilberforce in Shiloh Spinners Ltd v Harding [1973] AC 691 as authoritative. The paradigm case for relief against forfeiture is where there has been a failure to pay rent. Equity regards the power to terminate the lease for non-payment as a security for the payment obligation, so that if payment can be made and the delay in payment properly compensated for, relief will usually be granted.

63. [105]

    Prior to Shiloh Spinners, it had been suggested that relief might not be available where the forfeiture was for breach of some non-monetary covenant. This was rejected by his Lordship, at least where the relevant breach sounded in damages for which properly monetary compensation could be given. He said:

64. [106]

    Counsel for MTS contended that, on balance, the factors mentioned by Lord Wilberforce should lead to relief against forfeiture being granted. Counsel emphasised that it had never been suggested that there had been any failure by MTS to pay the rent payable under the lease. The rent had at all times been paid punctually. Nor had there been a beach of any other monetary covenant.

65. [107]

    Counsel accepted that on the interpretation of cl 10.1(1) which I have adopted, it was not open to MTS to conduct any tyre fitting activities at the premises without first obtaining planning permission (and the BIC for the unauthorised building) from Penrith Council. Counsel also accepted that it was not open to MTS to carry on any truck washing activities without the consent of MCPL pursuant to cl 10.1(1), whether commercial or not, and even if planning permission to do so were obtained. The same was so for any other potential use of the property, whether a commercial or business use or otherwise.

66. [108]

    Counsel acknowledged that MTS had no means of compelling MCPL to give any such consent. Therefore, if relief against forfeiture was given, MTS would be under a continued obligation to pay rent but would be unable to make any use of the property, until and unless the necessary planning consents were obtained, and so far as the use of the property for anything other than tyre fitting purposes was concerned, consent was granted. Counsel stated that this was well understood by Mr Azeez, and he was prepared to take the risk of having to pay rent for an indefinite period without any guarantee of ever being able to use the property for commercial purposes, or indeed otherwise.

67. [109]

    Counsel submitted that in these circumstances the loss of the opportunity to continue in occupation of the property and to pursue the planning consents would be a clear and significant detriment to MTS. All of the effort which had been put into the property, and in particular building of the building would be wasted. On the other hand, counsel submitted, there would effectively be no prejudice to MCPL. MCPL had led no evidence to show that there was some alternative tenant immediately available to take up the property.

68. [110]

    Counsel submitted that, following the grant of the lease to MTS, the enforcement action taken by Penrith Council and the EPA put Mr Azeez in an unenviable position. He had a lot to deal with. It also had to be borne in mind that the EPA’s complaints proved unfounded.

69. [111]

    Counsel acknowledged that Mr Azeez had not handled himself well. But in counsel’s submission, the main explanation for this was that Mr Azeez’s lack of commercial experience. He also came from a cultural background where oral agreements were considered more important than what might be said in writing, which at least provided some explanation for why, so counsel submitted, he had seen the matter as one of negotiation with the agent. Counsel submitted that he had learned, and would learn, from his mistakes.

70. [112]

    In making these submissions, counsel focused on Mr Azeez’s personal circumstances. The tenant of course was MTS, which, as a corporate entity, did not possess personal characteristics of the type possessed by an individual. But it was implicit in counsel’s approach that Mr Azeez would continue, as he had in the past, to control and direct MTS’ activities.

71. [113]

    Counsel submitted that, in these circumstances, I should be satisfied that the breaches which had occurred in the past would not recur. Counsel suggested that if relief against forfeiture were granted, Mr Azeez would be under close scrutiny by MCPL. If he stepped out of line, he was hardly likely to obtain relief against forfeiture a second time.

72. [114]

    Counsel for Muscio began by pointing out that throughout the proceedings MTS denied that it was in breach of the lease. The application for relief against forfeiture was made only as a fallback position if the validity of the termination was established.

73. [115]

    Counsel referred me to the judgment of Brereton J in Mineaplenty Pty Ltd v Trek 31 Pty Ltd [2006] NSWSC 1203 at [69]-[70]. His Honour noted that it had been said in some cases that a tenant could only obtain relief against forfeiture if the breach was admitted. But this is not an absolute rule, and it did not prevent the grant of relief in the case before his Honour. He said (at [70]):

74. [116]

    Counsel accepted his Honour’s statement of the law, but emphasised the reference to a “bona fide” dispute. Counsel submitted that the present case was far from a gentlemanly disagreement about the interpretation of the terms of the lease. Through its lawyers, MTS had done everything it could to place obstacles in the way of MCPL. The points raised had been unmeritorious. Counsel submitted that, on its own, MTS’ course of conduct was a reason to refuse relief.

75. [117]

    Counsel also referred me to the decision of Pembroke J in Casquash Pty Ltd v NSW Squash Ltd (No 2) [2012] NSWSC 522. In that case his Honour said:

76. [118]

    Counsel submitted that similar considerations applied in the present case. Mr Azeez’s conduct had not merely been unfortunate or mistaken, but dishonest. The Musicos were entitled to want nothing more to do with him. There was nothing unconscionable about them exercising MCPL’s legal right of termination. Counsel pointed out that the case for MTS did not involve an acknowledgment that Mr Azeez was out of his depth and somebody else who was trustworthy and competent could be brought in to run the company. Nor did it contain any acknowledgement by Mr Azeez which reflected on his behaviour, acknowledged it was profoundly wrong, and gave confidence that it would not be repeated in future.

77. [119]

    In the course of the argument, I asked counsel for MTS what compensation would be offered for the breach of the Permitted Use clause. Counsel replied that no damage had been suffered, and accordingly there was no compensation to be paid (although counsel did accept that MTS would be obliged to pay MCPL’s costs).

78. [120]

    This response illustrates a feature of the case which may distinguish it from other cases where relief has been granted against a termination for breach of a non-monetary covenant. In cases involving, for instance, breach of repair obligation, the covenant may be assessed and properly compensated. The present case is not necessarily of that character.

79. [121]

    The interest protected by clauses 10.1, 10.2 and 10.15 was MCPL’s interest in having a commercial business operating under planning permission on the subject land. The planning permission would, of course, run with the land and enure to MCPL’s benefit. Furthermore, the successful operation of a business on the property might have been expected to build up its leasing profile and make it more attractive on the market in the future. I accept that it would be impracticable to decree that MCPL be compensated for the breaches of the clauses so far committed by MTS. But that is not so much because no loss has been suffered. It is more that, having regard to the nature of the interest protected, the assessment of such loss in dollar terms is not practicably possible, at least at the moment.

80. [122]

    In these circumstances, one might ask whether relief against forfeiture should be available at all. The right to terminate for such a breach cannot realistically be seen as a form of security for the payment of compensation. Thus, it may be argued, the rationale for granting relief against forfeiture falls away. This point was not, however, taken by counsel for MCPL. I will therefore proceed on the assumption that relief against forfeiture is available.

81. [123]

    There is another preliminary point. At times the argument from counsel for MTS tended to treat the application for relief against forfeiture as a matter depending on the balance of convenience between the parties, as if the Court were dealing with an application for an interlocutory injunction. In my view such an approach is fundamentally incorrect.

82. [124]

    The doctrine of relief against forfeiture is not concerned with hardship to the tenant as such. The focus is on the landlord. What must be proved is that, in the circumstances of the case, the exercise of the landlord’s legal right to terminate the lease would be unconscionable. The factors mentioned by Lord Wilberforce in Shiloh Spinners fall to be considered only from that perspective.

83. [125]

    On a factual level, it is hardly a correct characterisation of the evidence to say that the breaches of the lease by MTS were merely the result of “mistakes” or “inexperience” on the part of Mr Azeez. On my findings, they were part of a concerted course of conduct by him which involved studiously ignoring MTS’ legal obligations (both under the lease and independently of it) with respect to the use of the property and deliberately obfuscating what was going on.

84. [126]

    Even if I took a less unfavourable view of Mr Azeez’s conduct, it would make little difference. For reasons already given, the focus of the Court’s enquiry is not, as such, the degree of fault surrounding the breach. The real significance of the evidence is what it says about Mr Azeez’s trustworthiness and reliability in the future.

85. [127]

    If the application for relief against forfeiture is successful, MCPL will be required to execute a fresh lease in favour of MTS for a period of almost three years, followed by a four year option for a further extension. Such a lease will contain implied obligations of good faith, and, perhaps reasonableness: Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349. It will recreate a long-term business relationship between the parties involving, on MCPL’s side, as well as MTS’s “fidelity to the bargain”: United Group Rail Services Limited v Rail Corporation New South Wales [2009] NSWCA 177 at [71]-[73]. Those obligations might require, in some circumstances, for MCPL to take positive action to advance MTS’s commercial interests: Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, 607-608.

86. [128]

    More specifically, if the lease is reinstated, MCPL will have a clear interest in the efficient and successful prosecution of an application for planning permission by MTS as lessee (see the references to cll 10.1, 10.2 and 10.15 above). MCPL also has wider interests in the proper conduct of MTS’ business. Pollution generated by MTS’ activities may become the responsibility of MCPL as owner if any remains on the site at the end of the lease: Contaminated Land Management Act 1997, s 6. MTS’ activities also have the potential to create liabilities for MCPL towards third parties (cl 10.2(2)).

87. [129]

    It is all very well for counsel for MTS to say that Mr Azeez has learned his lesson and will behave properly in future. His conduct to this point hardly inspires confidence. There is no evidence that he has accepted responsibility for that conduct and has changed his ways.

88. [130]

    And a more fundamental problem emerges from counsel’s further submission that the Court can be satisfied that things will change because Mr Azeez will be under increased scrutiny in future, and he would be unlikely to get further relief in the event of further breaches. Even if that were so, why should the Musicos have to bear the risk, and incur the cost, of giving Mr Azeez another opportunity? They have no obligation to underwrite the development of his business career. All that is required of them is not to exercise MCPL’s legal rights unconscionably.

89. [131]

    The degree of cooperation which would be required of MCPL if the lease is reinstated in the present case may not be as close as it was in Casquash. The likelihood of future misconduct by the tenant and further disputation between the parties may not be as great as it was in that case. But in my view the prior conduct of Mr Azeez amply justified a decision by the Musicos to have no further business dealings with him, and not to continue to entrust the property to him as a tenant. As the case has been conducted on the footing that he will continue to direct the affairs of MTS, the Musicos were entitled to take the same view toward that company.

90. [132]

    Mr Azeez’s conduct in the litigation has only provided further justification for such a decision. In saying this, I am not confining myself to Mr Azeez’s performance in the witness box. The whole defence had little merit. To that extent I have taken Mr Azeez’s conduct into account as part of the analysis of the factors mentioned by Lord Wilberforce. Whether it could also be taken into account as a separate factor requiring refusal of the application for relief as a matter of discretion does not need to be considered in the present case.

91. [133]

    For these reasons, at the close of the argument, I had formed the view that MTS had failed to make out its case for relief against forfeiture. But this was subject to one possible reservation.

92. [134]

    I did not think that I could ignore the fact that termination of the lease would leave MCPL in possession of the site with a large, newly constructed, purpose-built shed on it. If the Musicos were to put in a new tenant and obtain the necessary planning permission, that might conceivably be of considerable commercial benefit to them. MCPL would be receiving a windfall. Mr Azeez might be able to say that the Musicos had taken over his work for nothing and reaped the benefit of it.

93. [135]

    But that would only be so if the Musicos actually intended to retain the shed. If they proceeded with demolition, the question would not arise. Instead, it would demonstrate in the clearest possible way that the decision by the Musicos to terminate the lease was not driven by any desire to achieve some sort of windfall benefit, but rather was a legitimate determination to have nothing more to do with Mr Azeez or his companies.

94. [136]

    In these circumstances it occurred to me that the position could be put beyond doubt if MCPL gave an undertaking that, if the application for relief against forfeiture were dismissed, it would proceed to demolish the shed. I should make it clear that such an undertaking would not be something which the Court would be entitled to require from MCPL. MCPL is seeking possession and damages, which are legal remedies. It is not seeking equitable relief, which might properly be the subject of the imposition of terms.

95. [137]

    But, even if MCPL could not be required to give an undertaking, it could still do so voluntarily as a convenient evidentiary shortcut. If such an undertaking were given, the case, in my view, for refusal of the application would become overwhelming.

Conclusions and orders

1. [138]

   The arguments of the parties finished at the end of the second day of the hearing. At the resumption on the third day, I informed the parties that I had concluded that:

   1. (1)

      the notice of termination was valid;

   2. (2)

      if an appropriate undertaking was given by MCPL to proceed with demolition of the shed, I would refuse relief against forfeiture.

2. [139]

   Following debate about the terms of the undertaking, counsel for MTS sought an undertaking the terms of which paralleled Penrith Council’s demolition order of 14 May ([77] above]. Counsel for MCPL obtained instructions that an undertaking in these terms would be given.

3. [140]

   This resolved the claims which had been debated before me on 29 and 30 September. Counsel for the parties agreed on the form of the orders required to reflect my conclusions. The agreed orders were that I should note MCPL’s undertaking, make a declaration that the lease had been validly terminated, order possession and dismiss the application for relief against forfeiture.

4. [141]

   A question arose as to when MTS should vacate. In the end it was agreed that the date for vacation should be seven days after the delivery of this judgment. But at the request of counsel for MTS, I reserved liberty to MTS to apply for a stay during that seven-day period in the event of an appeal (in fact, leave to appeal would be required: see Narellan Franchise Pty Ltd v RBME Pty Ltd [2023] NSWCA 139 at [25]-[26]).

5. [142]

   On my findings, MCPL is now entitled to damages on two bases. First, it is entitled to damages in the nature of mesne profits for trespass. Secondly, it is entitled to damages for breach of contract. This in turn is made up (at least in theory) of damages for pre-termination breach and damages for loss of the bargain consequent upon a valid termination for breach.

6. [143]

   Eventually it was agreed that the damages for mesne profits should be assessed at the rate specified in the lease. But the amount payable under the lease includes not only the rent but also outgoings, the calculation of which created some complexities. The quantum could not in any event be determined until after vacation had occurred. It was agreed that the issue should be deferred until that had happened.

7. [144]

   It was also agreed to defer the assessment of any contractual damages to which MCPL is entitled until after the demolition of the building. By that point the actual cost of demolition (to the extent relevant) will be known.

8. [145]

   As to costs, counsel for MCPL agreed that MTS should have its costs of the contempt motion. It was also common ground that MTS and the guarantors would have to pay MCPL’s costs of the abandoned cross-claim.

9. [146]

   Counsel for MTS accepted that MCPL has succeeded, and is entitled to its costs on the claims for relief which are the subject of this judgment. The general costs of the proceedings to date will follow the costs of those claims.

10. [147]

    Counsel submitted, however, that, while MTS would be liable for these costs, the guarantors should not be. Counsel characterised the issue as involving only MCPL as plaintiff and MTS as defendant.

11. [148]

    I do not agree. Counsel appeared at the hearing for both MTS and the guarantors. This was appropriate, as it was part of the guarantors’ defence to the claim that there was no principal liability, or that relief against forfeiture should be given. In my view costs follow the event not only against MTS but also against the guarantors.

12. [149]

    It is, however, not possible to make final orders dealing with the costs of the proceedings. There are, as I have indicated outstanding questions of damages. Nor would it be possible to make a final order dealing with the costs of the proceedings to date. Some of the costs which have been incurred prior to this hearing (for instance the preparation of the expert report to which I have referred above) are costs attributable to the damages claim and MTS may not ultimately be successful in recovering them.

13. [150]

    It seems to me, however, that the case would be a suitable one for the making of an order for a lump sum payment on account of the costs for which MTS and the guarantors will ultimately be liable, following my practice in cases such as Omutta Pty Ltd v Wilson (No 2) [2019] NSWSC 401 and Rhino Rack Australia Pty Ltd v Hub Computing Services Pty Ltd [2021] NSWSC 231. In determining the amount, it will be necessary to make some allowance for MTS’ success on the contempt motion, and also excluding costs which may ultimately depend upon the outcome of the reserved damages claim. It was ultimately agreed between the parties that MTS could make an application for such an order when the matter returns to court for further mention in due course.

14. [151]

    Following the argument on 1 October, I indicated that I would put my reasons in writing and make the orders foreshadowed on that day when I delivered those written reasons.

15. [152]

    While preparing the written reasons, it came to my attention that the copy of the lease in evidence had not been stamped (presumably this is the reason, or one of the reasons, why it has not been registered) and I raised with the parties the question of compliance with s 8 of the Duties Act 1997. The solicitors for MCPL contended that MTS was liable for any applicable duty but nevertheless gave the usual undertaking as to stamping and payment. The solicitors for MTS contended that the lease was not dutiable. Now that a suitable undertaking has been given, it is unnecessary to consider the question of dutiability any further for the moment.

16. [153]

    The orders I now make are:

    1. (1)

       Declare that the lease over the land being Folio Identifier 7/A/2566 (“the Property”) dated 4 December 2024 (“the Lease”), was validly terminated by notice given by the plaintiff to the first defendant on 7 April 2025.

    2. (2)

       Order that the plaintiff have possession of the Property after 24 October 2025.

    3. (3)

       Grant leave to issue a writ of possession forthwith upon the plaintiff becoming entitled to possession under order 2.

    4. (4)

       Costs of the proceedings to date reserved.

    5. (5)

       Order that the plaintiff’s claims for damages for trespass and breach of contract be determined separately, and at a later stage of the proceedings.

    6. (6)

       Adjourn further proceedings to the Expedition List on 21 November 2025.

    7. (7)

       Grant liberty to apply for a stay of these orders, or any of them, pending appeal, such liberty to be exercised before 24 October 2025.