United Petroleum Pty Ltd v Lakiss

This is a case about “potholes”.

The word “pothole” originates from Middle English and was first recorded in the early nineteenth century. Relative to its contemporary or popular use, “pothole” has an interesting history tied to natural rock formations such as vertical limestone caves caused by erosion (the exploring of which was termed “potholing”); man-made cylindrical holes or pits related to mining; and, later, damage to a roadway. This case concerns the latter use of “pothole”; a defect or depression in a road’s surface, commonly caused by erosion related to weather or heavy traffic. The word “pothole” was first applied to roadways in the late nineteenth century. I am grateful that all of these matters are set out in the Oxford English Dictionary (online 2nd ed, March 2025).

A more interesting but less certain etymology of the word “pothole” lies in the story that it may have originated from the practice of pottery makers (or “potters”) in fifteenth and sixteenth century England or even as far back as the Roman Empire. In this apocryphal story, it is said that some opportunistic potters would take advantage of the deep ruts that travelling coaches and wagons had gouged into the stereotypically sodden roadways by digging further to reach clay deposits underneath and, by doing so, leaving behind a “potter’s hole” or “pott”, being Old English for a hole or pit.

The plaintiff, United Petroleum Pty Ltd, is the longstanding lessee of part of a property in Kemps Creek where it carries on a service station business. The owners and lessors of the service station are the defendants, two brothers Habib Lakiss and Bassem Lakiss (together, the Lakiss brothers). Serious and extensive potholes have plagued the entrance and exit driveways and the parking area at the service station for many years.

This dispute concerns the proper construction of the lease of the service station to determine whether United is liable for the costs it incurred in repairing the potholes or if the Lakiss brothers are liable for those costs so that United can deduct them from the rent it pays under the lease. Although the repair costs of just less than $11,000 are a very modest amount (and no doubt completely dwarfed by the legal costs incurred on both sides in these proceedings), the future of the lease is in doubt because the Lakiss brothers have threatened to terminate the lease and take possession of the service station.

United argues that on the proper construction of the lease, the obligation to repair the potholes falls on the Lakiss brothers as the lessor, while the Lakiss brothers argue that the obligation is one for United as the lessee to perform.

For the reasons set out below, I have determined that the Lakiss brothers are liable to pay the costs of repairing the potholes; United was entitled to deduct the repair costs from the rent payable to the Lakiss brothers; and the notice of default in the payment of rent that was sent by the Lakiss brothers to United was invalid. I will make appropriate declarations that accord with that decision.

The Lakiss brothers are the registered proprietors of Lot 111 in Deposited Plan 1137261 known as 1465-1467 Elizabeth Drive, Kemps Creek, New South Wales (Property). Kemps Creek is located within the Penrith municipality of New South Wales in the western reaches of Sydney.

The Lakiss brothers purchased the Property in 1994.

The Lakiss brothers are also the registered proprietors of Lot 112 in Deposited Plan 1137261 known as 1469-1471 Elizabeth Drive, Kemps Creek, New South Wales, which directly neighbours the western boundary of the Property (Neighbouring Property).

The Lakiss brothers also purchased the Neighbouring Property in 1994.

The Property and the Neighbouring Property are both subject to, and benefited by, an easement in the form of a right of carriageway, nine metres wide, on their southern boundary to Elizabeth Drive (Easements). The Easements cross between them on the western boundary of the Property, which is the eastern boundary of the Neighbouring Property. The Easements were registered on the title of the Property and the title of the Neighbouring Property on 18 January 2018 as DP1239026.

The Property and the Neighbouring Property are both located on Elizabeth Drive, which is a major thoroughfare providing access to the M7 Motorway and the Western Sydney International Airport, which is currently under construction.

Many large trucks, lorries and semi-trailers use Elizabeth Drive to drive onto and off the M7 Motorway.

Elizabeth Drive runs in an east-west direction south of the boundaries of the Property and the Neighbouring Property. Alongside both the Property and the Neighbouring Property, Elizabeth Drive accommodates traffic in both easterly and westerly directions, separated by a double line. A concrete kerb runs the length of Elizabeth Drive in front of the Property and the Neighbouring Property.

The land between the kerb and the southern boundaries of the Property and the Neighbouring Property was referred to by the parties as a “nature strip” but it has almost no nature of any description on it because it has been covered with crushed gravel and bitumen (Nature Strip). It is common ground between the parties that the Nature Strip forms part of a “public road” as defined in the Dictionary in the Roads Act 1993 (NSW).

Before 2012, the Nature Strip between the Western Driveway and the Eastern Driveway consisted of red soil, grass, a stand of palm trees and low shrubs.

The Nature Strip is not the property of the Lakiss brothers as it does not form part of the Property or the Neighbouring Property.

Unless a vehicle is parked to refuel at one of the fuel pumps on the Property (described in more detail below), there is no designated parking available on the Property (T25). As a result, vehicles (particularly trucks) often park on the Nature Strip (T23 and 25).

The whole of the southern part of the Property is covered with a concrete hardstand on which two distinct sets of vehicle refuelling facilities are located (Concrete Hardstand). The whole of the part of the Easements located on the Property is covered by part of the Concrete Hardstand.

On the southwestern side of the Property is the first set of the vehicle refuelling facilities: a set of three diesel fuel pumps arranged in a single row covered by a small size parapet for rain and sun protection (Small Parapet).

On the southeastern side of the Property is the second set of the vehicle refuelling facilities: a set of five fuel pumps arranged as two pumps in one row and three pumps in a second row, covered by a large size parapet for rain and sun protection (Large Parapet). The southern part of the Large Parapet is located right to the edge of the southern boundary of the Property.

There is sufficient space on either side of a fuel pump for a vehicle to pull up in the bay beside it.

To the north of the Large Parapet is a building which contains a “Quickstop” branded store (Store) and what was formerly an operating café called Micks Coffee House.

It is possible for vehicles to enter and exit the Property and the Neighbouring Property from and onto Elizabeth Drive by use of a kerbed driveway that is southwest of the Property (Western Driveway). It is also possible for vehicles to enter and exit the Property by use of a kerbed driveway from and onto Elizabeth Driveway, which is southeast of the Property (Eastern Driveway). The Easements allow vehicles to drive between the Neighbouring Property and the Property on the southwestern boundary.

The Eastern Driveway runs in a north-south direction from the eastern side of the Large Parapet to the kerb with Elizabeth Drive. Where the Eastern Driveway commences at the eastern side of the Large Parapet on the southern boundary of the Property, it is 9 metres wide. Where the Eastern Driveway ends at the kerb of Elizabeth Drive, it is 19 metres wide.

The Western Driveway is the first driveway that a driver of a vehicle would encounter travelling east along Elizabeth Drive towards the Property.

The Eastern Driveway is the first driveway that a driver of a vehicle would encounter travelling west along Elizabeth Drive towards the Property. Drivers of vehicles travelling in that direction would need to execute a turn across traffic to enter the Property, whichever driveway they used. Notably, there is a right turning bay for drivers seeking to execute this turn. That turning bay is situated across from the Western Driveway and the arrows painted on the section of road which constitutes the turning bay point only to the Western Driveway. A vehicle in that turning bay will not hold up any westbound traffic behind it which wishes to proceed past the Property. On the other hand, there is no turning bay from which to execute a right turn into the Property using the Eastern Driveway and therefore a vehicle seeking to do so may hold up the traffic behind it. Elizabeth Drive has therefore been patterned in a manner to make it considerably safer for vehicles turning right into the Property to use the Western Driveway, not the Eastern Driveway.

From 1994 until 2012, Habib Lakiss operated a service station on the Property branded “Red Spot” (Red Spot Service Station). I will refer to Habib Lakiss as Mr Lakiss.

There is photographic evidence that potholes existed on the Western Driveway, the Eastern Driveway and the Nature Strip while Mr Lakiss was operating the Red Spot Service Station on the Property and these potholes were proposed to be repaired as part of an upgrade to the Property in about late 2009 (Ex D). There is photographic evidence that there were no potholes on the Western Driveway, the Eastern Driveway or the Nature Strip in January 2010, although there were potholes evident immediately to the south of the southern boundary of the Neighbouring Property at that time (Ex B and Ex C).

Mr Lakiss gave evidence and was cross-examined at the hearing of these proceedings.

Mr Lakiss gave evidence-in-chief that it is possible for vehicles to enter the Property using the Eastern Driveway, that it was not unsafe for them to do so, there is more than sufficient space for them to turn around and safely enter the bays beside the fuel pumps and that larger general access heavy vehicles (up to 19 metres in length) might have to execute a slight 3-point turn on the northwestern side of the Property to pull into the diesel fuel pumps under the Small Parapet.

In cross-examination, however, contrary to Mr Lakiss’ evidence-in-chief, Mr Lakiss agreed that trucks going in opposite directions across the Eastern Driveway is “possibly not safe but the people sometimes are doing it” (T35–36). Mr Lakiss also readily agreed that it is easier for vehicles to enter the Property using the Western Driveway and exit the Property using the Eastern Driveway (T32). I do not accept the evidence of Mr Lakiss that it would be convenient for the drivers of other vehicles to wait while trucks executed 3-point turns (T31). Common sense dictates that customers waiting for very large trucks to execute such turns would be inconvenienced.

The ease with which vehicles may enter the Property using the Western Driveway was also emphasised in the photograph of the Property from January 2010 (Ex B, when Mr Lakiss was operating the Red Spot Service Station) which depicted an “entry” sign at the Western Driveway to indicate the manner in which vehicles should enter the Property (T21–22). Mr Lakiss was unable to recall a sign saying “entry” on the Eastern Driveway (T23) and the photograph of the Property from January 2010 (Ex C) did not demonstrate that there was any such a sign on the Eastern Driveway.

Further, Mr Lakiss gave evidence in cross-examination that the kerbed gutter was put in no more than five months before the Lease with United commenced (T39-40).

Amy Gerraty, United’s Senior Counsel Regulatory, also gave evidence at the hearing of the proceedings. In Ms Gerraty’s evidence-in-chief, she stated that she attended the Property on 3 February 2025 at which time she observed vehicles entering the Property using the Western Driveway and exiting the Property using the Eastern Driveway. Ms Gerraty confirmed this evidence in cross-examination, adding that she was at the Property for less than two hours but in that time she did not observe any vehicles enter the Property via the Eastern Driveway (T17).

Ms Gerraty also gave evidence that in her opinion it would be unsafe to allow vehicles to approach the refuelling pumps from two opposite directions (which accords with Mr Lakiss’ evidence in cross-examination) as the Eastern Driveway is too narrow to accommodate two passing lanes of traffic and there is insufficient space for vehicles to turn around on the Property to safely enter the bays beside the refuelling pumps.

From my observation of the lay out of the Property, the orientation of the pumps under each of the Small Parapet and the Large Parapet, which are from south-west to north-east, make it more natural for vehicles to enter the Property from Elizabeth Drive using the Western Driveway and exit the Property to Elizabeth Drive using the Eastern Driveway.

Further, in 2022 as part of a market review of the rent for the Property (described in more detail below), the report dated 26 August 2022 by Acumentis (Acumentis report) at [3.8] describes the Western Driveway as the place of “ingress” to the Property, the Eastern Driveway as the place of “egress” from the Property and each of the Western Driveway and the Eastern Driveway as “an unsealed gravel crossover”.

Based on these factors, while I consider that it is possible for vehicles to enter or exit the Property from and to Elizabeth Drive using either the Western Driveway or the Eastern Driveway, and that vehicles have done so, I consider that is neither safe, convenient or usual for vehicles to do so.. In my assessment, the safe, convenient, and usual flow of vehicles is to enter the Property using the Western Driveway and exit the Property using the Eastern Driveway.

In my view, it is necessary for large general access heavy vehicles (such as trucks, lorries and semi-trailers) that enter the Property using the Western Driveway to use the diesel fuel pumps under the Small Parapet to then exit the Property across the Nature Strip before reaching the Eastern Driveway to go onto Elizabeth Drive. In my opinion, there is insufficient room for such heavy vehicles that go east across the Property and under the Large Parapet to then turn towards the Eastern Driveway.

On 23 January 2012, the Lakiss brothers as lessors and United as lessee entered a written lease of part of the Property for a term of 10 years, commencing on 17 April 2012 and terminating on 16 April 2022, with an option to renew for four further terms of five years each (Lease).

The definitions used in the Lease are contained in cl 1.2, with many such definitions utilising Items contained in the Reference Schedule which forms part of the Lease (cls 1.1, 1.2(36)).

The recitals to the Lease and Items 1 and 2 of the Reference Schedule define the Lakiss brothers as the Landlord and United as the Tenant respectively.

Clause 2.1 of the Lease states:

Clause 1.2(35) of the Lease defines Premises to be as defined in Item 3 of the Reference Schedule. Clause 1.2(24) of the Lease defines Land to be as defined in Item 3 of the Reference Schedule. Land and Premises are each defined in the following way in the Reference Schedule, respectively:

The Plan which is attached to the Lease shows the complete delineation of the Premises, including the location of the Small Parapet, the Large Parapet and the Store. The Nature Strip, the Western Driveway and the Eastern Driveway are all located outside the Premises on the Plan.

The Permitted Use of the Premises is dealt with in cl 9.1(1), which relevantly states:

Clause 1.2(34) of the Lease defines Permitted Use to be the use stated in Item 10 of the Reference Schedule. Item 10 of the Reference Schedule states:

Clause 3 of the Lease provides for the payment of Rent in monthly instalments (cl 3.1) and the market review of the Rent is to be conducted on the Market Review Dates (cl 3.3, defined in Item 9 of the Reference Schedule to be every five years). The Rent is defined in cl 1.2(37) to be the amount stated in Item 7 of the Reference Schedule, which is $195,300.00 per annum, plus GST.

Clause 6 of the Lease deals with the circumstances in which there is an abatement of the Rent on the total or partial damage or destruction of the Premises until the Lakiss brothers restore the Premises and put them in a fit condition for the occupation or use by United. The primary obligation is on the Lakiss brothers to rebuild and reinstate the Premises within six months in consultation with United, subject to a right of United to terminate the Lease if the restoration has not been started within three months (cls 6.2–6.4).

Clauses 9.2 and 9.3 are central to United’s arguments in the proceedings. These provisions concern the circumstances in which it is necessary to comply with any Official Requirement, which is defined in cl 1.2(32) of the Lease to be:

Clauses 9.2 and 9.3 are in the following terms:

Clause 10 of the Lease deals with maintenance and repair of the Premises.

Clause 10.1 and 10.2 of the Lease relevantly state:

Clause 10.4 of the Lease is of central importance to United’s arguments in the proceedings. It relevantly states (all grammatical and punctuation errors left in place):

Clause 13 of the Lease details various obligations that are placed on the Lakiss brothers.

Especially significant in United’s case is the covenant of quiet enjoyment contained in cl 13.3 of the Lease, which relevantly states:

Clause 13.4 deals with the obligation of the Lakiss brothers to undertake structural repairs of the Premises and is in the following terms:

The Lease also contains provisions which concern the consequences of specified defaults by United. Those defaults include the non-payment of Rent for 14 days (cl 14.1(1)), which if not remedied within 30 days of the Lakiss brothers serving written notice on United specifying the default and seeking its rectification will entitle the Lakiss brothers to re-enter and take possession of the Premises and, by notice to United, terminate the Lease (cl 14.2).

The option to renew the Lease for further terms is contained in cl 17 of the Lease. It was common ground that the Lease remains in operation by reason of United having exercised the option to renew the Lease on 7 October 2021, with the further five-year term having commenced on 17 April 2022.

Prior to the commencement of the Lease on 17 April 2012, Dion Barendse, then United’s Regional Retail Manager for New South Wales, attended the Premises to carry out an inspection. The purpose of the inspection was to record the condition of the Premises as at the commencement of the Lease and to make a record of any maintenance work to be undertaken by United or requested of the Lakiss brothers.

Mr Barendse recorded the maintenance issues he identified during the inspection in an email dated 16 April 2012 to which he attached photographs he had taken during the course of his inspection. There are no potholes recorded as being present in the vicinity of the Property and in need of repair and none of the photographs in evidence from the inspection show any potholes on the Nature Strip, the Western Driveway, the Easements or the Eastern Driveway. In my opinion, if there had been potholes in existence at that time, they would have featured in Mr Barendse’s report and been evident in the photographs.

In light of Mr Lakiss’ evidence that the kerbed gutter was installed no more than five months before the Lease commenced, this may explain why any potholes in this region previously would have been repaired.

I conclude from this evidence that there were no potholes on the Nature Strip, the Western Driveway, the Easements or the Eastern Driveway at the time that United commenced operating a service station at the Premises in April 2012. In infer that the potholes, which had been in existence while Mr Lakiss was operating the Red Spot Service Station on the Property and were proposed to be repaired as part of an upgrade to the Property in about late 2009 (Ex D), had been repaired as contemplated.

For these reasons, I reject the contention of the Lakiss brothers that there were potholes in those locations at the time the Lease commenced.

As contemplated by the Permitted Use in cl 9.1 of the Lease (as defined in Item 10 of the Reference Schedule), United has been operating a service station and convenience store on the Property since April 2012 (together, United Service Station). United appointed an agent to run the United Service Station, which operates daily between the hours of 5am to 10pm from Monday to Saturday and between the hours of 6am to 9pm on Sunday.

As I have found above, the safe, convenient, and usual flow of vehicles is to enter the United Service Station on the Property using the Western Driveway and exit the United Service Station on the Property using the Eastern Driveway.

By reason of the location of the United Service Station on Elizabeth Drive, close to the M7 Motorway and the Western Sydney International Airport (which is presently under construction), the United Service Station tends to attract a large number of customers driving heavy commercial vehicles in the form of trucks, lorries and semi-trailers. The number of these heavy vehicles constantly entering the United Service Station via the Western Driveway, parking on the Nature Strip and exiting the United Service Station via to Eastern Driveway probably explains why there are so many potholes that have arisen in those regions over the years of operation.

On 18 December 2012, United caused a caveat with the dealing number AH452751B to be registered on title of the Property in respect of United’s leasehold interest.

In February and March 2014 respectively, two United customers made claims that their vehicles had suffered damage due to the presence of potholes at the “entry” and “exit” of the United Service Station.

From photographs taken in August 2020 and December 2020, there is evidence of potholes on the Western Driveway, the Eastern Driveway and the Nature Strip.

As stated above, on 7 October 2021, United gave notice pursuant to cl 17.1 of the Lease to renew the Lease for a further five-year term. The further term commenced on 17 April 2022 and will expire on 16 April 2027. The renewal was not formalised in writing.

During the process of a market review of the rent under the Lease in 2022, a report dated 6 January 2022 was prepared by National Property Valuers NSW Pty Ltd (NPV report) for the Lakiss brothers and the Acumentis report dated 26 August 2022 was prepared by Acumentis for United.

The NPV report did not contain any references to potholes.

The Acumentis report contains photographs taken in August 2022, which depict potholes on the Western Driveway and on the Nature Strip (sections 5.10–5.11). Otherwise, the Acumentis report did not contain any references to potholes. The Acumentis report also refers to the “[e]xtensive gravel hardstand surrounding the fuel forecourt including ingress and egress points, in poor condition” (section 5.10).

On 18 November 2022, Rawlinsons issued the market rent determination (Rawlinsons determination), which referred to the Nature Strip as being “gravel and dirt covered”, the presence of “large potholes” that were “quite deep” and that “[t]hese potholes must be navigated to enter the Premises” (section 10.31). The Rawlinsons determination also referred to a “large pot hole [sic]” within the Easements on the Neighbouring Property (section 10.32). There are photographs of the inspection that occurred on 7 October 2022 for the purposes of the Rawlinsons determination that show potholes at the Western Driveway and on the Easements (section 6.19).

At some time immediately prior to 28 February 2022, United reported the presence of potholes near the Property and made a request for remediation to Transport for New South Wales (TfNSW), who forwarded it to Ventia, the state road maintenance provider in the area of the Property working on behalf of TfNSW.

On 28 February 2022, Ventia sent an email to United stating that they would investigate and determine what could be done in relation to the potholes.

After an exchange of correspondence between Ventia and United, on 22 March 2022, Ventia sent an email to United stating that Ventia was responsible for maintaining Elizabeth Drive up to the roadside kerb and therefore United’s request regarding the potholes was outside the scope of their contract. Ventia suggested in the email that United make a request of Penrith City Council.

On 23 March 2022, Ventia sent an email to United (following a query of the position by United) stating that the road reserve was nominally controlled by the Council, which is why Ventia suggested United contact the Council.

On 28 March 2022 at 11:47am, United sent an email to the Council reporting “pot holes in front of our property”, which it was the “[C]ouncil’s responsibility to rectify”. The email also requested that the Council take action to repair the potholes.

On 28 March 2022 at 3:02pm, the Council sent an email to United stating that because Elizabeth Drive was a state road they were forwarding the request for action to the maintenance provider for TfNSW .

On 29 April 2022 at 4:40pm, United sent an email to the Council stating:

Attached to United’s email of 29 April 2022 at 4:40pm were photographs of extremely large water-filled potholes located on the Western Driveway and the Nature Strip, which demonstrate that it was almost impossible for a vehicle to access the refuelling pumps on the Property without passing over the potholes. In my opinion, the condition and location of those potholes presented a serious impediment to a vehicle seeking to access the refuelling pumps on the Property because of the danger that they might cause damage to that vehicle.

On 29 April 2022 at 4:50pm, United sent a further email to the Council following up in relation to the potholes that had been reported and stating that:

On 2 May 2022 at 8:41am, the Council sent an email to Ventia following up regarding the potholes that had been reported by United.

On 2 May 2022 at 9:03am, United sent an email to Ventia and the Council, which attached details and photographs of the potholes.

On 12 May 2022 at 12:44pm, an internal email at United reported that one of the largest card customers of United (P.G. & S. Linehaul), purchasing over 100,000 litres per month from United, had complained about the potholes. The email states (correcting the obvious spelling and grammatical errors in it):

On 12 May 2022 at 2:23pm, United sent an email to Ventia asking them for an urgent update and stating:

On 16 May 2022 at 8:54am, an internal email at United attached photographs which a customer had sent to United over the previous weekend. Those photographs demonstrate large water-filled potholes on the Western Driveway and the Nature Strip.

On 16 May 2022 at 9:05am, an internal email at United asked for an update on the potholes and stated “[w]e are losing volume on site”.

On 17 May 2022 at 11:51am, Ventia sent an email to United reiterating that Ventia is responsible for maintaining Elizabeth Drive up to the roadside kerb and therefore the request to repair the potholes was outside the scope of their contract.

On 17 May 2022 at 2:41pm, an internal email at United reported that the Council expected to take no longer than two weeks to fill the potholes “they are responsible for” and any potholes on the Property will be for United to fix.

On 17 May 2022 at 2:58pm, United sent an email to the Council asking them to escalate the issue of the potholes as a priority as they had been trying to resolve the issue since March 2022. The email also asserted that “[w]e are losing business daily”.

On 23 May 2022, United sent an email to the Council asking for any further update and stating that “[t]his is becoming critical to our business”.

On 30 May 2022, an internal email at United concerning the potholes referred to “losing sales at the site”.

On 31 May 2022, United sent an email to the Council again asking for an urgent update because they had been asking for months and requiring the indication of a date when the potholes will be fixed. The email also stated:

On 1 June 2022 at 9:54am, an internal email at United referred again to Linehaul having called United again regarding the potholes and stating:

On 2 June 2022 at 9:55am, an internal email at United referred to the repair of potholes by the Council that morning, although noting that there were further potholes to be repaired.

On 2 June 2022 at 10:47am, an internal email at United stated that the potholes had not been filled properly and the same situation would occur if it rained again.

On 7 June 2022 at 9:32am, an internal email at United referred again to a complaint made by Linehaul. The email stated (correcting the obvious spelling and grammatical errors in it):

On 7 June 2022 at 2:18pm, an internal email at United recorded that they needed to get urgent quotes to fix the potholes and that they needed to be proactive as “[w]e don’t want to lose this account”.

Ms Gerraty gave evidence in cross-examination that her review of United’s files did not reveal that Linehaul took their business elsewhere (T18).

On 17 June 2022, Levitt Robinson (who were acting as solicitors for the Lakiss brothers at the time) sent a letter to the Council, which stated that (amongst other things):

On 18 October 2022, the Council sent a letter to Levitt Robinson advising that there is a hard surface access to the Nature Strip that is being used for heavy vehicle parking that does not meet the Council’s specifications, there has been no prior approval from the Council to use the Nature Strip as a dedicated heavy vehicle parking area and both the Western Driveway and the Eastern Driveway do not meet the Council’s specifications for a heavy duty driveway. The letter also stated that the Council had repaired the potholes previously out of goodwill to the Lakiss brothers and would not repair the potholes on the driveways or the Nature Strip but would install sandstone blocks to prevent heavy trucks parking on the Nature Strip.

The letter also referred to s 142 of the Roads Act as giving rise to the responsibility on the Lakiss brothers as the beneficiary of the structures on the nature strip to maintain them in a satisfactory condition.

Attached to the letter from the Council were photographs of the Property taken in May 2012, May 2022 and June 2022, providing clear evidence of potholes on the Nature Strip in the vicinity of heavy vehicles parking on it.

On 3 February 2023, Johnson Winter Slattery (JWS, the solicitors acting for United) sent a letter by email to Mayfair Real Estate (the agent for the Lakiss brothers), which referred to cls 10.1(2) and 13.4(1) of the Lease and stated (emphasis in original):

On 8 February 2023, JWS received an email from Mayfair that indicated that the Lakiss brothers would not undertake repairs of the potholes as “[t]he driveway does not form part of the structure of the building” and stated that the “reason for the driveway being in the condition it is today, is due to the heavy vehicles coming in and out and the surrounding area has not been maintained over the years”.

On 20 February 2024, JWS sent a letter by email to Mr Lakiss regarding the repair of the potholes. The letter referred to the development of the potholes on the “driveway and pathway”, which had deteriorated and caused United loss due to customers avoiding entering the Premises because of potential risks associated with the potholes. The letter also mentioned the repair of the potholes by the Council in early June 2022, the refusal of the Council to carry out further work on the potholes, and that United “had itself also taken interim measures on four separate occasions over the past 6 months to address the potholes using compacted bitumen”.

Specifically, the letter stated that the state of the driveway was infringing on United’s use of the Premises and that, if their customers were unable to safely enter the Premises, United was being prevented from using the Premises as was contemplated by the Lease. The letter asserted that the Lakiss brothers were obligated to undertake the repairs of the potholes pursuant to cls 10.1(2) and 13.4(1)(a) of the Lease because the works to repair them were structural in nature. The letter concluded by demanding that the Lakiss brothers repair the potholes by no later than 5 March 2024.

Photographs taken in May 2024 by United clearly show large potholes on the Western Driveway, the Easements and the Nature Strip. Those photographs also evidence that those areas were covered in a mixture of bitumen, gravel and dirt abutting the Concrete Hardstand.

On 28 June 2024, JWS sent a letter by email to Mr Lakiss informing him that the driveway had deteriorated to such an extent that United’s customers were being prevented from accessing the Premises. JWS informed Mr Lakiss that United would undertake interim repairs of the potholes and United would deduct the cost of those repairs from rental payments in accordance with cl 10.4(2) of the Lease.

On 15 July 2024, Abela Building Maintenance sent an email to United which stated:

The email also contained two quotes – one for the material and the other for the labour, totalling $10,937.30 inclusive of GST. The email also attached photographs of the Western Driveway, the Easements and the Nature Strip, which show significant potholes across them and the gravel and dirt surface of those sites.

On 24 July 2024, United issued work order NSW-41977 to Abela (Work Order) to repair the potholes in accordance with the quote from Abela of $10,937.30 inclusive of GST. The Work Order states:

On 29 July 2024, Abela issued invoice number 10792 to United for $10,937.30 for the repairs performed on the potholes (Invoice). The work performed by Abela as stated on the Invoice was as follows:

On 30 September 2024, United paid rent under the Lease to the Lakiss brothers of $21,919.98, which it had calculated after deducting $10,937.30 as the costs to repair the potholes.

On 17 October 2024, Yazbeck Law (the solicitors acting for the Lakiss brothers) sent a letter by email to United in which they asserted that United was in default under the Lease by failing to pay the full amount of the rent of $32,857.28 for October 2024 that was due on 1 October 2024. The letter stated that it constituted a default notice to United in accordance with cl 14 of the Lease (First Default Notice). The First Default Notice sought a response from United within 30 days that stated the basis on which United formed the view that it was entitled to make the deduction.

On 31 October 2024, Yazbeck Law sent a letter by email to JWS enclosing the First Default Notice.

On 31 October 2024, United paid $43,794.58 in rent under the Lease to the Lakiss brothers, which included the amount of $10,937.30 that it had deducted in the rent paid to the Lakiss brothers on 30 September 2024.

On 4 November 2024, JWS sent a letter to Yazbeck Law notifying them of the rent paid on 31 October 2024, which included the amount of $10,937.30 as rent for October 2024.

On 21 November 2024, United sent a letter of demand by email to the Lakiss brothers (Letter of Demand) for payment of $10,937.30 for the costs of the repair of the potholes. The Letter of Demand required to Lakiss brothers to pay the amount of $10,937.30 pursuant to cl 10.4(2) of the Lease by 6 December 2024, failing which it would be deducted by United from the next rent payment due on 1 January 2024. Attached to the Letter of Demand was an invoice from United and the Invoice.

On 22 November 2024, Yazbeck Law sent an email to JWS requesting certain documents and information in respect of the Letter of Demand and concluded by stating:

On 2 December 2024, JWS sent a letter by email to Yazbeck Law enclosing the Work Order and the Invoice. The letter repeated that it was the intention of United to deduct $10,937.30 from the next rental payment on 1 January 2025 if the Lakiss brothers did not pay that amount to United by 6 December 2024.

On 3 December 2024, Yazbeck Law sent a letter by email to JWS stating that the Lakiss brothers are not responsible for areas outside the Premises, the repair obligation in cl 10.4 of the Lease expressly applied to the Premises only and United was therefore not permitted to deduct any payment of the costs to repair the potholes from the rent under the Lease.

Ms Gerraty gave evidence in cross-examination that her search of United’s files did not reveal any complaints received by United in 2023 or 2024 about potholes in the vicinity of the Premises (T18).

United proceeded to deduct the amount of $10,937.30 from the rent otherwise due on 1 January 2025.

On 15 January 2025, Yazbeck Law sent a letter by email to United in which they stated that United was in default of the Lease by failing to pay the full amount of the rent of $32,857.28, which was due on 1 January 2025. The letter stated that it constituted a default notice to United in accordance with cl 14 of the Lease (Second Default Notice). The Second Default Notice demanded that United remedy the default by paying the balance of $10,937.30 within 30 days, failing which the Lakiss brothers may take further action, including but not limited to termination of the Lease and legal proceedings to recover any outstanding amounts and damages.

On 15 January 2025, Yazbeck Law sent a letter by email to JWS (to which the Second Default Notice was also attached) asserting that United was not entitled to deduct the amount of the repair costs from the rent and requiring the breach of the Lease to be remedied immediately.

On 22 January 2025, JWS sent a letter by email to Yazbeck Law referring to the Letter of Demand and the Second Default Notice. The letter asserted that United was entitled to deduct the amount of the repair costs pursuant to cl 10.4(1) of the Lease, there was no default by United under the terms of the Lease and the Lakiss brothers were not entitled to issue the Second Default Notice. The letter invited the Lakiss brothers to withdraw the Second Default Notice by 5pm on 24 January 2025.

On 30 January 2025, JWS sent an email to Yazbeck Law referring to a discussion between them regarding the Lease and the entry to and exit from the Premises. The email concluded by requesting confirmation that the Lakiss brothers would withdraw the Second Default Notice by 4:00pm on 31 January 2025, failing which United would proceed to file an application to have the Second Default Notice set aside.

On 31 January 2025, Yazbeck Law sent an email to JWS that stated, amongst other things, the Lakiss brothers were not obliged to maintain or repair the Nature Strip and would not withdraw the Second Default Notice.

On 7 February 2025, JWS sent a letter by email to Yazbeck Law stating that even if the Nature Strip was land owned by the Council, under s 142 of the Roads Act, the Lakiss brothers were responsible for the repair of it. The letter also provided notice that United intended to file proceedings seeking urgent injunctive and final relief in relation to the dispute; and sought that the Lakiss brothers either withdraw the Second Default Notice or provide an undertaking that they would not re-enter and take possession of the Premises or terminate the Lease until the dispute was resolved on a final basis.

On 7 February 2025, Yazbeck Law sent an email to JWS recording that the Lakiss brothers would not withdraw the Second Default Notice and would not provide the requested undertaking.

On 11 February 2025, United commenced these proceedings by summons seeking an interlocutory injunction and final relief in the form of the following declarations, as well as their costs:

Evidence in the form of an expert report dated 25 February 2025 by Christopher Reed (Reed Report) was provided at the hearing. Mr Reed is an experienced surveyor who conducted a survey at the Property (including the Easement, the Concrete Hardstand, the Small Parapet, the Large Parapet and the Store), the Western Driveway, the Eastern Driveway and the Nature Strip on 24 February 2025 (Survey).

In annexure C to the Report, Mr Reed depicted the 15 potholes he located during the course of the Survey. None of the 15 potholes are located on the Property but are immediately next to the Property. Three of those potholes were located on the part of Easements (which is on the Neighbouring Property), six of those potholes were located immediately between the Western Driveway and the Property in the area comprising the Easements and six of those potholes were located on the Nature Strip (four of which were between the Property and the Eastern Driveway).

On 3 March 2025, Mr Lakiss attended at the Property and took photographs of it, the Neighbouring Property, the Western Driveway, the Nature Strip and the Eastern Driveway.

I am satisfied from looking at those photographs that they show large potholes across all of these areas. I am also satisfied that the Nature Strip is a mixture of sections of bitumen, gravel and dirt.

At the heart of this dispute is the proper construction of the Lease. Ordinary principles of contract law apply to leases: Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; [1985] HCA 14, Mason J (with whom Wilson and Deane JJ agreed) at 29.

The Lease is a written commercial contract and is therefore subject to the principles regarding the construction of written contracts generally as well as those principles particularly applicable to the construction of written commercial contracts.

The principles that govern the construction of written contracts are well established. The meaning of the words used in the contract are to be determined objectively, applying the standard of what a reasonable person in the position of the parties would have understood them to mean. This approach is commonly known as the objective theory of contract: Western Australian Rugby Union v Australian Rugby Union Ltd [2017] NSWSC 1174, Hammerschlag J at [36].

Perhaps most notably, the objective theory of contract was summarised in the unanimous decision of the High Court of Australia in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52, Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ at [40] stating:

The relevant principles of construction were also summarised by Bathurst CJ (with whom Macfarlan and Meagher JJA agreed) in Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184, at [52]:

This approach was more recently restated in Rinehart v Hancock Prospecting Pty Ltd (2019) 267 CLR 514; [2019] HCA 13, with Kiefel CJ, Gageler, Nettle and Gordon JJ at [44] confirming the relevance of the “language used by the parties, the surrounding circumstances, and the purposes and objects to be secured by the contract.”

In this regard, in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; [1982] HCA 24, Mason J at 352 stated that any extrinsic facts:

The legal principles applicable to the construction of a written commercial contract were not in dispute between the parties in these proceedings. They are also well established and uncontroversial.

In Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7, French CJ, Hayne, Crennan and Kiefel JJ stated at [35] (citations omitted):

The task of construction to be undertaken in cases such as this was elucidated in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37, with French CJ, Nettle and Gordon JJ stating at [46]–[51] (citations omitted):

These principles of contractual construction were recently confirmed by the High Court in Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd (2023) 276 CLR 500; [2023] HCA 6, Kiefel CJ, Gageler, Gordon, Gleeson and Jagot JJ at [27], quoting Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12, Kiefel, Bell and Gordon JJ at [16]:

Where the contract to be construed is made up of different components, preference is given to a construction that provides a congruent operation of the various components as a whole: Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17, Gleeson CJ, McHugh, Gummow and Kirby JJ at [16].

While the court should endeavour to reach an interpretation that reads all terms of the contract harmoniously, if that is not possible, then the court should prefer the construction that produces the least disharmony: HP Mercantile Pty Ltd v Hartnett [2016] NSWCA 342, Leeming JA at [182] (with whom Bathurst CJ and Payne JA agreed).

There are errors in the drafting of provisions of the Lease which are at issue in these proceedings.

If there is clearly an error on the face of an instrument, and it is clear what a reasonable person would have understood the parties to have meant, then the error may be “corrected” as a matter of ordinary contractual construction. So much was stated in Wilson v Wilson (1854) 5 HL Cas 40; 10 ER 811, by Lord St Leonards at 822:

In Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317; [2019] NSWCA 11, Leeming JA at [7] provided useful examples of common linguistic errors which may be overcome in this way, such as “inconsistent” being read as “consistent”, or conceptual errors which might require “lessor” to be read as “lessee.” His Honour observed that contractual language “is not read like a computer program, such that any slip is fatal.”

The relevant principles of contractual construction as they concern the “correction” of absurdity, inconsistency, as well as “palpable” or “obvious” mistakes within a contract were recently restated in Zhong v Guan [2024] NSWCA 300, by Kirk JA (with whom Payne JA and Price AJA agreed) at [23]–[38]. The following is a summary of the principles stated in Zhong:

In Zhong, Kirk JA summarised these principles at [38] in the following way:

The parties agreed that the relevant principles in respect of a covenant of quiet enjoyment in a lease (such as expressed in cl 13.3 of the Lease) are conveniently summarised in Byrnes v Jokana Pty Ltd [2002] FCA 41 by Allsop J at [60]–[69] as follows (emphasis in original):

There can be a breach of the covenant of quiet enjoyment by a lessor from acts of commission or omission: Hawkesbury Nominees Pty Ltd v Battik Pty Ltd [2000] FCA 185, Hill J (with whom Gallop J agreed) at [37], citing Dennett v Atherton (1872) LR 7 QB 316, 326-7; Robinson v Kilvert (1889) 41 Ch D 88, 97.

United argues that s 142(1) of the Roads Act applies to determine the responsibility of the Lakiss brothers to repair the potholes. The Lakiss brothers argue that the operation of the exception in s 142(3) of the Roads Act means that they have no such responsibility.

Section 142 of the Roads Act states:

The “right of access that a person has as the owner of adjoining land” to which reference is made in s 142(3) of the Roads Act is expressed in s 6 of the Roads Act in the following terms:

United submitted that they were entitled to deduct the cost of the repairs reasonably incurred from its payment of rent payable to the Lakiss brothers by 1 January 2025 by reason of the operation of cl 10.4 of the Lease. In satisfying each of the elements of cl 10.4 of the Lease, United submitted that:

In response to my inquiries, United submitted that it is not making a claim under cl 13.3 of the Lease directly as justifying its action in deducting the repair costs from the rent by way of a general law right to set-off and that, somewhat curiously, it was only arguing the Lakiss brothers breached cl 13.3 as a means to satisfy one of the conditions of cl 10.4 of the Lease (T46–47 and T78–79).

United submitted that the repair works to the potholes undertaken were required to rectify or make good “disruption to the Premises”.

United contended that the word “disruption” should be interpreted according to its ordinary meaning, within the context of the Lease and with a commercial understanding that does not limit “disruption” exclusively to a physical disruption of the Premises. United argued that if “disruption” was to be interpreted narrowly to only include physical damage to the Premises, the term would be redundant or “have no work to do” given that “damage” within the string of matters in the opening part of cl 10.4 already captures that concept. It was further submitted that a broader interpretation of “disruption” would reasonably encompass disruptions to the use of the Premises.

United submitted that the potholes situated on the only means of “ingress and egress to the Premises” – presumably a reference to the potholes on the Easements, the Western Driveway and those on the Nature Strip leading up or near to the Eastern Driveway– caused “substantial interference” and disruption to its enjoyment of the Premises and the operation of its business, as they hindered the ability of customers to safely enter and exit the Premises. United argued that the driveways and pathways used by its customers had deteriorated to such an extent that many customers were avoiding the site and complaining about difficulties in accessing it. Furthermore, United contended that the damage to the only available parking area on the Nature Strip would have deterred potential customers who might otherwise have intended to park and make purchases at the Store.

I was invited to infer from the evidence of the potholes in 2022 that similar disruption was occurring in 2024, in line with the solicitor correspondence from that time. United submitted that the absence of written complaints from customers in 2024 should not lead to the conclusion that no complaints were made.

United contended that, alternatively, even if there was no significant or substantial disruption due to customers being able to use the Eastern Driveway instead of the Western Driveway, there would still be considerable disruption to the operation of all fuel pumps.

United submitted that the Lakiss brothers are responsible for maintaining the areas where potholes appear pursuant to the covenant of quiet enjoyment set out in cl 13.3 of the Lease.

United contended that the Lakiss brothers breached the covenant of quiet enjoyment by omitting to repair the potholes. United submitted that the requirement for substantial interference to ground a breach of the covenant of quiet enjoyment as outlined in Byrnes need not reach the level of frustration for the purposes of the Lease, and that even if the acts that caused the potholes were not those of the Lakiss brothers, the Lakiss brothers remain liable if they fail to take action to eliminate or prevent the disruption caused by them. United argued that the potholes caused substantial interference with its ordinary enjoyment of the Premises as a service station, which is in breach of the covenant in cl 13.3. United further submitted that the covenant in cl 13.3 required the Lakiss brothers to take steps to prevent or eliminate the disruption caused by the potholes, ensuring United’s quiet enjoyment of the Premises.

United also submitted that the Lakiss brothers, as registered proprietors of the Property and the Neighbouring Property, have a responsibility to maintain the Western Driveway, the Eastern Driveway and the Nature Strip in a satisfactory state of repair under s 142(1) of the Roads Act. United submitted that the Lakiss brothers are persons who have a right to the control, use or benefit of a structure on or over a public road.

For the purposes of s 142(1) of the Roads Act, United submitted that the Western Driveway, the Eastern Driveway and the Nature Strip constitute a structure on or over a public road because they comprise concrete, bitumen and gravel surfaces. United contended that the Lakiss brothers are subject to the maintenance obligations under s 142(1) because they have the use and benefit of these driveways and parking areas. United argued that the Lakiss brothers benefit from this use as they have leased the Premises that rely on the driveways and they have used the driveways for the Neighbouring Property for their own purposes for decades. United contended that s 142(2) of the Roads Act operates such that even if the Lakiss brothers carried out works of creating the parking area on the Nature Strip (by removing the previous landscaping in 2011) without the consent of the Council, it nevertheless bears an obligation to maintain the area, as the beneficiary of that area. United contended that the obligation is not excluded by s 142(3) of the Roads Act, because the Lakiss brothers’ use and benefit of the structures goes beyond a mere right of access as the owner of the land adjacent to the public road.

United submitted that the Lakiss brothers were on notice from the Council that the maintenance of each of the Western Driveway, the Eastern Driveway and the Nature Strip was their responsibility under the Roads Act.

United contended that a breach of the covenant in cl 13.3 of the Lease may still exist even where there is no obligation for the Lakiss brothers to carry out the repairs at law. United submitted that the Lakiss brothers had the ability to resolve and remedy the interference with United’s enjoyment of the Premises, and their failure to do so constituted a breach of the covenant.

United submitted that pursuant to cl 9.2 of the Lease, the repairs to the potholes constituted works under the Lease that were the responsibility of the Lakiss brothers due to their obligation under s 142 of the Roads Act, which operates independently of the covenant of quiet enjoyment in cl 13.3.

United submitted that under the exceptions in cl 9.3 of the Lease, United is not responsible for any Official Requirement concerning the Premises that requires work of a structural or capital nature. United submitted that the repairs to the potholes went beyond reasonable wear and tear and were of a structural nature, as evidenced by the Work Order. United contended that this meant, under the operation cl 9.2, the responsibility for complying with any Official Requirement falls on the Lakiss brothers, not United. Therefore, United argued that cl 9.2 requires the Lakiss brothers to carry out structural repairs, which satisfies the requirement in cl 10.4 of the Lease that such works must be the responsibility of the Lakiss brothers.

United submitted that it acted reasonably in forming the view that the repairs needed to be carried out urgently, given the complaints and disruption in 2022, the Council’s refusal to undertake the repairs and the correspondence with the Lakiss brothers indicating their unwillingness to do so. With no action taken by either the Lakiss brothers or the Council, and the potholes becoming untenable in 2024, United contended that it had no choice but to proceed with the repairs and deduct the repair costs from the rent payable.

The Lakiss brothers contended that even if I were to find that United was entitled to deduct some amount for the repair of certain potholes, the case must fail because the declaratory relief sought was only in respect to their entitlement to deduct the full amount. It was said that this was in the nature of “all or nothing” relief.

The Lakiss brothers submitted that the repair works were not required to rectify or make good any defect in, want of repair, accident or damage to the Premises because none of the potholes were located in or on the Premises. They contended that United’s sole argument was that the work was required to address disruption to the Premises.

The Lakiss brothers submitted that the phrase “disruption to the Premises” used in cl 10.4 of the Lease does not refer to “disruption to the operation of the Tenant’s use of the Premises”, which is an expression used in cl 13.4(2) of the Lease. They contended that “disruption to the Premises” in cl 10.4 refers to disruption to the physical condition of the Premises. They argued that the repairs could not be deemed necessary to rectify any physical disruption to the Premises because none of the potholes were located in or on the Premises.

The Lakiss brothers also contended that cl 10.1(1)(b) of the Lease – which requires the tenant to “fix any damage caused by the Tenant or the Tenant’s Employee’s” (sic) – includes damage caused by customers of United. They further submitted that the relevant provisions of the Lease are limited to the repair of the Premises, and the Premises only, as the subject matter of the contract is the Premises.

The Lakiss brothers argued that the absence of a comma between “damage” and “disruption” in cl 10.4(1) means that there is use of a combined expression “damage disruption” in the clause which emphasises that there must be physical disruption to the Premises. For this reason, the Lakiss brothers submit cl 10.4(1) should not be read as referring to the disruption to the business conducted on the Premises. They further argued that this interpretation is supported by the different use of the disjunctive in the phrase “damage or disruption” in cl 10.4(1)(b), which refers to the disruption of services.

The Lakiss brothers submitted that there was no evidence of disruption to the Premises in 2023 and 2024. They contended that there was no indication that the single customer who complained in 2022 caused any disruption to the Premises or the business conducted there, and no evidence that this customer withdrew their business. Additionally, they say that United found no record of complaints about the potholes in 2023 and 2024. The Lakiss brothers argued that even if I were to find in favour of United on the interpretation of “disruption to the Premises”, United would still fail to establish disruption to the business conducted on the Premises due to a lack of evidence.

The Lakiss brothers submitted that the works under the Lease were not their responsibility under cl 13.4 of the Lease, titled “Structural Repairs”, because they contended that the potholes were not located on the Premises.

The Lakiss brothers submitted that there was no suggestion that any alleged interruption to United’s quiet enjoyment was caused by the Lakiss brothers or anyone authorised by them for whom they might be liable. They contended that the potholes were created by United’s customers and United’s use of the Western Driveway, the Easements and the Nature Strip in the operation of United’s business by United’s customers entering the Premises.

The Lakiss brothers submitted that it cannot be said that they were interfering with United’s possession of the Premises because the potholes were not on the Premises.

The Lakiss brothers submitted that there is no evidence to suggest that their refusal to repair the potholes caused undue interruption or disturbance, as there was no evidence of complaints from customers in respect of the 2024 potholes and there were no potholes on the Eastern Driveway which, they say, could be used for both entry and exit to the Premises.

The Lakiss brothers submitted that there would be some disturbance to the use of the Premises due to the potholes, but this is caveated in two ways. First, the Premises demised in 2021 included the potholes. Second, there is no substantial interference because the Eastern Driveway alone can be used for entry and exit from the Premises.

The Lakiss brothers also contended that any disruption to the Western Driveway, or to part of the Neighbouring Property burdened by the Easements, does not violate the covenant or warranty given by the Lakiss brothers that United would have access to the Premises. They argued that this is because the Eastern Driveway provides access to the Premises and it has not been affected by potholes.

The Lakiss brothers contended that even assuming their refusal to repair potholes outside of the Premises and (in the case of those on the Western Driveway and the Nature Strip) outside land owned by them, could constitute a breach of the covenant of quiet enjoyment in cl 13.3, it would not follow that the works to repair the potholes were the responsibility of the Lakiss brothers under the Lease. They argued that this is because the Lease does not specify what the Landlord must do to remedy a breach of the covenant. Therefore, United would still not be entitled to deduct the cost of repairs under cl 10.4 of the Lease.

The Lakiss brothers also submitted that at the time of entering into the Lease in 2012 and when the lease was renewed in April 2022 pursuant to notice given on 7 October 2021, the condition of the Premises included potholes outside of it. They argued that United took the Premises in that condition, at least in the area on the Nature Strip and outside the Western Driveway.

The Lakiss brothers also contended that any reliance on s 142(1)(a) of the Roads Act is misplaced. They argued that to be satisfied that there is a “structure”, I would need to conclude that the entire area is bitumen, including the Nature Strip. The Lakiss brothers submitted that the bitumen ends and gravel and dirt begin on the Nature Strip.

Regarding the exception in s 142(3) of the Roads Act that the maintenance obligation in s 142(1) “does not apply to a person whose right to the control, use or benefit of a structure or work consists merely of … a right of access that the person has as the owner of adjoining land”, the Lakiss brothers argued that this exception applies to them but does not apply to United. They say that this is because United, as tenants of the Premises, have the use or benefit of the structure over a public road which is used for customer parking on the Nature Strip, whereas the Lakiss brothers only have that right as the owners of the adjoining land (being the Property and the Neighbouring Property). The Lakiss brothers contended that their right of access is the Western Driveway, not the Eastern Driveway, there are no potholes on the Eastern Driveway, and vehicles exit the Premises under the Large Parapet and out via the Eastern Driveway. They submitted that vehicles wait within the boundaries of the Premises before leaving, without driving on the Nature Strip.

In relation to the exception in cl 9.3, the Lakiss brothers submitted that because the subject matter of the Lease is the demise of the Premises, the provision can only be referring to works of a structural or capital nature to the Premises.

The Lakiss brothers submitted that while there may be an exception in the Lease, United is not relieved of their statutory obligations. The Lakiss brothers raised the argument that United cannot contract out of their statutory obligations in s 142(1) of the Roads Act. The Lakiss brothers contended that that the second sentence of cl 9.3 cannot impose a contractual obligation on them where the statute itself provides a specific exemption for the Lakiss brothers, particularly to the extent that the right of access applies to the Lakiss brothers as the owners of the Adjoining Property.

The Lakiss brothers submitted that when determining whether the Premises are “operable” for the purposes of cl 10.4(1)(a) of the Lease, it is limited to physical defects in the building, such as the roof collapsing. They argued that on the proper construction, if the Premises are operating, then the Premises should be considered to be “operable”.

In reply to the submission regarding “damage disruption” being a single expression, United submitted that this is simply a typographical error as the expression is missing a comma or use of the disjunctive “or” and therefore “disruption” should not be limited to those occurring physically on the Premises. United argued that the phrase “damage or disruption to the services” in cl 10.4(1)(b) of the Lease is incredibly broad, and the site of the emergency repair may not necessarily be physically on the Premises.

In reply to the submission regarding the lack of evidence of complaints and disruption within the meaning of cl 10.4 of the Lease, United invited me once again to draw an inference from the evidence of the potholes in 2022 and the solicitor correspondence in 2024.

In reply to the submission that large trucks could pass under the Large Parapet while remaining within the Premises and that the closure of the Western Driveway would not cause significant disruption, United argued that it would be required to close the fuel pumps closest to the southern border of the Premises to facilitate the one-way rotation around the petrol station, which would amount to a substantial disruption to the business operating on the Premises.

United submitted that in cl 10.4, the required works are to rectify or make good the disruption, not merely the possibility of, or potential for, disruption, but the actual disruption itself. United argued that the existence of a pothole and its location constitute the disruption.

In reply to argument that the Premises are “operable”, United submitted that it would be an uncommercial and absurd construction if cl 10.4 required the Premises to become wholly inoperable before United could be entitled to carry out repairs, particularly if the Lakiss brothers refused to do so.

In reply to the submission on quiet enjoyment and its application to the uses contemplated at the time of entering into the Lease, and the way the Premises were operating and set up, United contended that the parties anticipated the Western Driveway as the point of entrance. United referenced Mr Lakiss’ evidence that he constructed the Western Driveway five months prior to the commencement of the Lease. Additionally, it was said that the Western Driveway was explicitly marked as the entrance until an unknown time, and a reasonable prospective tenant inspecting the Property would have been able to observe the spaces available for large vehicles to pass over the Nature Strip and the parking areas on the Nature Strip.

United also submitted that there is no evidence to suggest that the potholes in the immediate period before 2012 were not fixed and repaired by the time the Lease came into operation. United argued that I should not infer that United took a lease of the Premises with driveways in a condition that included potholes, as the Western Driveway had been constructed five months earlier. Therefore, there is no obvious inference that the Western Driveway was likely to immediately give way to potholes. United contended that the potholes occurred as a result of reasonable wear and tear, without any improper use or reckless behaviour.

United submitted that the evidence does not demonstrate that United entered into the Lease and renewed the Lease at a time when there were significant potholes present, such that they would have assumed responsibility for them contrary to the terms of the Lease.

In reply to the submission that the landlord must have authorised the acts that could cause the disturbance, United submitted that omissions can lead to disruption or a breach of the quiet enjoyment clause. United accepted that, in relation to omissions, it must be something that is within the Lakiss brothers’ control but need not be authorised by the Lakiss brothers.

In relation to the breach of the covenant of quiet enjoyment, United submitted that if there is a breach of the covenant due to the failure to repair, and the covenant imposes a positive obligation to carry out those repairs.

In reply to the submissions on the operation of s 142 of the Roads Act, United argued that the bitumen which extends over the Western Driveway and the Nature Strip and constitutes a structure.

In reply to the submission on the exception in s 142(3) of the Roads Act, United submitted that this subsection must be read carefully and does not apply to a person whose right to control, use, or benefit consists solely of a right of access that the person has as the owner of adjoining land. United relied on s 6 of the Roads Act, which grants the right of access to public roads for owners of adjoining land, to argue that the owner of land adjoining a public road is entitled, as of right, to access across the boundary between the land and the public road. United contended that this is not the only type of use or enjoyment that the Lakiss brothers have, and therefore, both United and the Lakiss brothers are in the same position under s 142 of the Roads Act.

United raised the issue of whether an alternative form of declaration could be granted in the proceeding if the court found that certain potholes were eligible for repair and deduction under cl 10.4, while others were not. United submitted that the granting of declaratory relief is within the discretion of the court. United emphasised that the parties seek certainty regarding how to address the issue of the obligation to repair the potholes, and meet the cost of those repairs, in the future.

The principal issue in dispute in these proceedings concerns the proper construction of cls 10.4 and 13.3 of the Lease.

Applying the relevant principles enunciated in Toll, Woodside, Mount Bruce Mining and Laundy Hotels, as the Lease is a commercial document I need to determine what a reasonable businessperson would have understood those terms to mean, considering the language used, the surrounding circumstances known to the parties and the commercial purpose or object to be secured by the Lease, with the latter to be facilitated by understanding the genesis of the transaction, the background, the context and the market in which the parties are operating.

A key consideration in this exercise is that the Permitted Use of the Premises by United under cl 9.1(1) of the Lease was as a service station and convenience store. The commercial purpose of the Lease for the Lakiss brothers was for them to make a return on their ownership of the Property through the receipt of rent. The commercial purpose of the Lease for United was so that it could operate the United Service Station, which would generate sufficient revenue to enable it to pay the rent and the other costs of operating the United Service Station and earn a profit. This means that it was expressly contemplated that it would be necessary for customers in vehicles to enter and exit the Property so that they could use the refuelling facilities on the Property and purchase items from the United Service Station.

The location of the Premises on Elizabeth Drive next to the M7 Motorway also provides a key context in which the provisions of the Lease are to be interpreted because it meant that large size trucks, lorries and semi-trailers were amongst the prospective customers of United likely to use the United Service Station and likely to cause damage to the surfaces surrounding the Premises by driving on them.

Turning to the words of cl 10.4 of the Lease, the first element in that provision that I need to determine is whether “works of any nature are required in order to rectify or make good any defect in, want of repair, accident, damage disruption to the Premises” (cl 10.4(1)).

In construing these words, I consider that by applying the principles set out in Zhong it is necessary to correct an obvious mistake in those words because they are missing an “or” between “damage” and “disruption”. I reject the submissions of the Lakiss brothers that those words should be construed as a single expression “damage disruption” for two reasons.

First, in cl 10.4(1)(b) the matching expression “defect, want of repair, accident, damage or disruption” is used, which indicates that the notions of “damage” and “disruption” are separate from each other and lends support to the argument that the failure to separate “damage” and “disruption” earlier in cl 10.4(1) was a mistake. Applying the principle in Wilkie, it is also a construction that provides a congruent operation of these various components as a whole.

Secondly, there are multiple obvious grammatical errors across the whole of cl 10.4, being:

Clearly, cl 10.4 of the Lease is a provision replete with drafting mistakes.

For these reasons, I intend to construe cl 10.4(1) by reading in “or” so that it is read as “damage or disruption”.

I consider that the ordinary meaning should be given to the word “disruption” such that it is an occurrence that prevents something from continuing in its normal, traditional or usual way.

While I agree with the submissions made by the Lakiss brothers that “damage to the Premises” must mean physical damage to the Premises, I consider that the meaning of “disruption to the Premises” is different and wider than just the physical condition of the Premises. Reading those words in the commercial context of the Lease involving the operation of the United Service Station with customers of United needing to enter and exit the Premises in their vehicles to use the refuelling pumps and make purchases from the United Service Station, I consider that on its proper construction, a “disruption to the Premises” can arise by reason of something inside or outside the Premises and is not simply limited to the physical condition of the Premises. Whether something is a “disruption to the Premises” will always involve a question of degree, but that word is not conditioned by requiring it to be a “serious disruption” or “significant disruption”. In my view, taking account of the permitted use of the Premises as a service station and convenience store as an underlying commercial purpose and object of the Lease, any occurrence that prevents the United Service Station from operating in its normal or usual way will constitute a “disruption to the Premises” pursuant to cl 10.4(1) of the Lease.

In my view, a physical barrier to the entry and exit of vehicles to and from the Premises, even if that barrier is not on the Premises, would fall within the first element of cl 10.4(1) because it would constitute a “disruption to the Premises”.

In arriving at this construction of cl 10.4(1), I have been cognisant that cl 13.4(2) uses the expression “disruption to the Tenant’s use of the Premises”. In my opinion, that expression is a subset of those matters that would fall within the wider concept of “disruption to the Premises” and in most instances the “disruption” would fall within both expressions, but not always. This can be best illustrated by examples, such as jack hammering occurring outside the Premises which generates significant noise or a sewer malfunction beside the Premises causing very unpleasant odours, both of which disrupt the Premises by making it an unpleasant place to be but would not disrupt United’s use of the Premises because customers could still come and go as they wish and make their acquisitions of fuel and convenience store items. Similarly, a road closure in the vicinity of the Premises would be a “disruption of the Premises” within cl 10.4(1) but still enable United to use the Premises by serving fuel and convenience store items at the United Service Station.

Similarly, I am also minded to observe that, in using that phrase, cl 13.4(2) contemplates that if a pothole were located on the Land – defined as meaning “the whole of the land described as Lot 111” – as opposed to on the Premises, it would be the obligation of the landlord to conduct repair, maintenance or building work to the same. However, on the evidence before me, none of the potholes which are the subject of this dispute fall within the boundaries of the Property.

In the present case, I am satisfied that the evidence establishes that the presence of the potholes on the Western Driveway, the Easements and the Nature Strip are a “disruption to the Premises” within the meaning of the first element of cl 10.4(1). The placement and nature of those potholes are such that they provide a significant barrier to a customer wishing to enter the Premises in a vehicle using the Western Driveway to access the fuel pumps located under the Small Parapet and the Large Parapet and park on the Nature Strip to use the Store within the United Service Station. The potholes are large in size, deep and fill with water in the rain. They present an obvious hazard to a driver of a vehicle who seeks to enter the Premises to use the United Service Station, both in terms of the possible damage that might be caused to the vehicle if it goes through any part of one of the potholes and the inconvenience caused by the driver having to avoid or navigate the potholes. These are all matters that arise from common experience and common sense for a driver of a vehicle. The photographs of the potholes across the years of the Lease, including of the potholes that were repaired, amply demonstrate to me the obvious danger they posed. The potholes represent a deterrence to customers and are a “disruption to the Premises” within the meaning of cl 10.4(1) of the Lease.

In my view, it is not necessary for United to provide evidence that during 2023 and 2024 there were complaints from customers about the potholes, threats from customers to terminate their accounts with United or the actual termination of such accounts to prove that the potholes are to be regarded as a “disruption to the Premises”. While any such complaints, threats and terminations are relevant evidence, they are not essential. The facts that in 2014 there had been previous customer complaints of damage to vehicles from the potholes and in 2022 there were threats by a significant customer of United to terminate their acquisition of fuel at the United Service Station, are both relevant by showing the potential consequences to United if the potholes were not repaired.

The correspondence in 2022 contains multiple references to United “suffering badly with the potholes”, the potholes worsening and United losing business, volume and sales. It was not necessary for United to wait until it could evidence one or more of these consequences of the potholes in 2024 before they constituted a “disruption to the Premises”. The potential for one or more of those matters from 2022 to naturally flow from the presence of the potholes in 2024 highlight the serious ongoing “disruption to the Premises” that the potholes represented.

In my opinion, the obvious deterrence to entry to the Premises that is represented by the nature of the potholes is such that United might never know the full extent of the number of potential customers of the United Service Station who chose not to enter the Premises because they are not prepared to risk damage to their vehicles or engage in the inconvenience of navigating around the potholes. I consider that the potholes were in such poor condition that they clearly would have deterred potential customers and constituted a “disruption to the Premises”.

The repairs of the potholes undertaken by United in 2024 were clearly “works in order to rectify or make good any … disruption to the Premises” within the meaning of cl 10.4(1). Those works removed the potholes and therefore eliminated the associated danger, disruption and deterrence to the normal or usual way of entering the Premises and parking on the Nature Strip.

The second element of cl 10.4(1) of the Lease is that the works undertaken by United are “works which under this Lease are [the] responsibility of” the Lakiss brothers. Once again, applying the principles in Zhang, I have read in the word “the” into this expression to rectify an obvious error in the drafting of this part of cl 10.4.

United rely on the covenant of quiet enjoyment in cl 13.3 of the Lease to provide the basis on which such repairs of the potholes are said to be the responsibility of the Lakiss brothers. Clause 13.3 requires that the Lakiss brothers “must allow [United] to occupy and use the Premises without undue interruption or disturbance”.

The common law is reflected in the first sentence of cl 13.3 of the Lease and both parties made submissions which equated the requirements in cl 13.3 with those of the common law in relation to the covenant of quiet enjoyment owed by a landlord to a tenant under a lease. I have proceeded on that basis.

Applying the principle in Hawkesbury Nominees, as repeated in Byrnes, I agree with United that the actions and omissions of the Lakiss brothers may fall within cl 13.3 of the Lease. This means that an omission by the Lakiss brothers to repair the potholes might be caught by the provision if the other elements of it are satisfied. Contrary to the argument put by the Lakiss brothers, the fact that the Lakiss brothers did not cause or authorise the potholes is not relevant to an inquiry based on their omission to eliminate the disruption caused by the potholes. The same reasoning goes for the potholes being caused by the customers of United from driving across the Western Driveway, the potholes on the Easements and the potholes on the Nature Strip. The inquiry in this case is not on who caused these potholes but who had the responsibility to repair them.

Clause 13.3 must be read in light of the other principles recited in Byrnes. I have addressed the application of those principles below.

An essential focus of the principles in Byrnes is the purpose for which the Premises were let, which was for United to carry on the Permitted Use of operating a service station and convenience store. In the present case, on the evidence before me, there has been a substantial interference with the use of the Premises for that purpose by reason of the potholes. As I have already stated above, the evidence establishes that the potholes were an obvious hazard, danger and deterrence to customers using the United Service Station to purchase fuel and convenience items. Absent the repair of the potholes, United did not have the full benefit of the Premises for the known purpose of operating the United Service Station.

I reject the argument raised by the Lakiss brothers that the Eastern Driveway does not have potholes and so can be used to both enter and exit the United Service Station. As I have found above, the safe, convenient and usual flow of vehicles is to enter the United Service Station using the Western Driveway and exit the United Service Station using the Eastern Driveway. The Eastern Driveway is not a safe and convenient way for vehicles to enter the United Service Station. The lack of potholes on the Eastern Driveway does not detract from the substantial interference caused by the potholes located on the Western Driveway, the Easements and the Nature Strip.

It is not necessary for United to demonstrate that the substantial interference with the use of the Premises as a service station due to the potholes has caused the practical frustration of the Lease, or that the interference has rendered it impractical or uneconomic to carry on United’s business of the United Service Station. In my view, objectively assessed, the potholes caused a material and substantial interference with United’s possession of the Premises and the obligation was on the Lakiss brothers under cl 13.3 to prevent or eliminate the disruption caused by those potholes.

The Lakiss brothers argue that while there would only be some disturbance to the use of the Premises from the potholes, there is no evidence that their refusal to repair the potholes caused undue interruption or disturbance to United. Yet the solicitors acting for the Lakiss brothers wrote to the Council on 17 June 2022 asserting that the potholes on the Nature Strip at that time posed a significant risk of harm to health, safety and property, and were interfering with the Lakiss brothers’ rights as owners of the Property in a “substantial and unreasonable” manner. That letter also contained the assertion that the Council’s ongoing failure to repair the potholes was causing damage to the Lakiss brothers and amounted to a tortious nuisance “with mud or dust being spread or dispersed from those defects throughout the Property”. This contradictory position makes the arguments now raised by the Lakiss brothers that there is no evidence of undue interruption or disturbance from the potholes particularly hollow.

To the extent that the potholes are located on the part of the Easements which exist on the Neighbouring Property, the Lakiss brothers as owners of the Neighbouring Property clearly have it within their power to repair those potholes.

I also disagree with the submission made by the Lakiss brothers that the Lease was entered into in 2012 and then renewed in October 2021 in the condition of having potholes outside the Premises. As I have found above, I am not satisfied that the Lease commenced in April 2012 with potholes in existence outside the Premises. There is also no evidence that there were potholes outside the Premises in October 2021 when the option to renew the Lease was exercised. Further, the key consideration with respect to the commencement of the Lease in 2012 and the exercise of the option to renew it in October 2021 is the determination of who is responsible to repair the potholes under the terms of the Lease, not whether potholes were in existence at each of those times.

Section 142 of the Roads Act does not resolve the issue of the responsibility for the repair of the potholes on the Western Driveway and the Nature Strip as between the Lakiss brothers and United. There is no definition of “structure” in the Roads Act but I consider that it will have its ordinary meaning of comprising any built or constructed surface such that the combination of constructed concrete, bitumen, gravel and dirt across these areas would comprise a “structure” for the purposes of s 142. I consider that both United (as lessee of the Premises) and the Lakiss brothers (as owners of the Property and lessors of the Premises) have the use and benefit of that structure and therefore each of them must maintain it under s 142(1) of the Roads Act.

I also consider that the Lakiss brothers are not exempted from this maintenance responsibility by operation of s 142(3) of the Roads Act because the Lakiss brothers do not have the right to the use and benefit of the structure merely by their right of access as owners of the Neighbouring Property and the Property. The right of access to Elizabeth Drive for the Lakiss brothers as owners of the Neighbouring Property and the Property is contained in s 6 of the Roads Act. The structure on the Western Driveway and the Eastern Driveway is used to provide access and egress for the vehicles of the customers wishing to use the United Service Station. The Nature Strip is also used for the purposes of providing parking to vehicles of customers using the United Service Station. Those structures benefit United in the operation of the United Service Station, but also benefit the Lakiss brothers who have leased the Premises to United contemplating that the Nature Strip will be used as a parking area.

As the Lakiss brothers have a responsibility to maintain the “structure”, in the form of the Western Driveway, the Nature Strip and the Eastern Driveway, by operation of s 142 of the Roads Act; requiring them to repair any potholes in those areas arising from the covenant of quiet enjoyment they owe to United under cl 13.3 of the Lease gives cl 13.3 a congruent operation with s 142. In other words, it obliges them to take the same steps under the Lease that they are obliged to take under the statute.

The consequence of the operation of cl 13.3 is that the repair of the potholes is the responsibility of the Lakiss brothers so as to meet their obligations under the covenant of quiet enjoyment. They also have the responsibility to make the pothole repairs because of the operation of s 142 of the Roads Act. As a result, the second element of cl 10.4(1) is also satisfied.

United argued that s 142 of the Roads Act placed the responsibility for the repair of the potholes on the Lakiss brothers and that it constituted an Official Requirement for which cl 9.2 of the Lease imposed an obligation on the Lakiss brothers. Although, in light of the findings I have made above it is not necessary to decide this issue, I have set out my opinion on it below.

I do not agree with United’s argument. Clause 9.2 is directed at “any Official Requirement concerning the Premises, the Tenant’s Property or the Tenant’s use or occupation of the Premises”. In my view, on its plain words, s 142 of the Roads Act cannot be characterised as any of those things. Section 142 is directed to the responsibility of a party to maintain a structure on or over a public road. The Premises are not such a structure and the statutory provision does not address United’s use or occupation of the Premises.

I do not think that s 142 of the Roads Act operates to impose any obligation or responsibility on the Lakiss brothers to repair the potholes under cl 9.2 of the Lease. As a result, in my view there is no responsibility on the Lakiss brothers to repair the potholes arising under cl 9.2 of the Lease and the second element in cl 10.4(1) is not satisfied by operation of cl 9.2.

In light of the state of the potholes in 2024, which posed an obvious hazard, danger and deterrence to customers, I have little difficulty concluding that United acted reasonably in forming a view that there was urgency of an immediate need to repair the potholes to render the Premises safe, secure or operable within the meaning of cl 10.4(1)(a). To the extent that the potholes constituted a disruption to the Premises, the Premises were not operable and the repair of them caused the Premises to be operable. As a result, the element in cl 10.4(1)(a) of the Lease is satisfied.

United also made repeated demands of the Lakiss brothers to repair the potholes (on 3 February 2023 and 20 February 2024) and gave notice on 28 June 2024 to the Lakiss brothers of United’s intention to repair the potholes and deduct the costs from the rent under cl 10.4(2) before United undertook the repairs.

United obtained a quote from Abela of $10,937.30 before requesting it to undertake the repair of the potholes. There were approximately 24 potholes that were repaired by Abela. The Invoice amount of $10,937.30 rendered by Abela was in accordance with its quote.

United sent the Letter of Demand on 21 November 2024 to the Lakiss brothers requiring them to pay the repair costs of the potholes of $10,937.30 by 6 December 2024. The Lakiss brothers did not allege that the repair costs were unreasonable. The Lakiss brothers failed to pay the repair costs within 14 days of the Letter of Demand. I conclude that the element in cl 10.4(1)(b) of the Lease is also satisfied.

United was therefore entitled to exercise its rights in cl 10.4(2) by deducting the amount of $10,937.30 as the costs reasonably incurred by United from the rent payable.

It follows that the Lakiss brothers were not entitled to send the Second Default Notice to United. The Second Default Notice was therefore invalid.

For the reasons set out above, I will make the following orders: