DERRIMUT HEALTH & FITNESS PTY LTD v ARETZIS PROPERTIES PTY LTD [2025] SADC 131

Applicant: DERRIMUT HEALTH & FITNESS PTY LTD Counsel: MR E BELPERIO - Solicitor: DW FOX TUCKER Respondent: ARETZIS PROPERTIES PTY LTD Counsel: MR R ROSS-SMITH - Solicitor: PGC LEGAL Hearing Date/s: 14/10/2025, 15/10/2025, 20/10/2025 File No/s: CIV-25-009955 B DISTRICT COURT OF SOUTH AUSTRALIA (Civil) DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment. The onus remains on any person using material in the judgment to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court in which it was generated. DERRIMUT HEALTH & FITNESS P/L v ARETZIS PROPERTIES P/L [2025] SADC 131 Judgment of his Honour Judge Burnett 6 November 2025 LANDLORD AND TENANT - TERMINATION OF THE TENANCY - FORFEITURE - RELIEF AGAINST FORFEITURE LANDLORD AND TENANT - TERMINATION OF THE TENANCY - FORFEITURE - RELIEF AGAINST FORFEITURE - EQUITABLE RELIEF The applicant, Derrimut Health & Fitness Pty Ltd, has brought a claim seeking, in the equitable jurisdiction of the Court, relief against forfeiture of a lease (the Lease) that it entered into with the respondent, Aretzis Properties Pty Ltd, for the lease of premises at shop 6, 1031-1037 South Road, Melrose Park (the Premises). The Lease was entered into on 26 August 2019 and was for an initial period of eight years with a right of renewal for a further period of five years. The applicant conducted a gymnasium business from the Premises. The applicant had a long history of failing to pay rent on time and the respondent had issued over twenty notices to remedy default. On 20 August 2025, the respondent terminated the Lease and served on the applicant a Notice of Re-Entry. In exercising those rights, the respondent relied upon a term of the Lease which permitted it to terminate the Lease and re-enter the Premises in the event that a winding up petition was presented against the applicant. The Deputy Commissioner of Taxation had issued a winding up petition against the applicant on 25 June 2025. Immediately prior to the termination of the Lease, the applicant had been in breach of its obligation to pay rent but remedied that breach by paying the outstanding rent on 20 August 2025. The applicant seeks relief against forfeiture on the ground that it is unconscionable for the respondent to exercise its right to terminate the Lease where: (1) the winding up proceedings had not been determined; and (2) in the winding up proceedings, the applicant asserts and intends to prove its solvency; and (3) the respondent had formed the intention to force the applicant out of the Lease and then acted opportunistically to evict the applicant based on the existence of the winding up petition when it had already determined to lease the Premises to a new tenant. -- 1 of 31 -- At the time of the hearing, the winding up petition against the applicant was still extant. The applicant and the Deputy Commissioner had entered into an in-principle agreement that would resolve their dispute which was dependent on a financier providing funding to the applicant of at least $24 million. The terms of that agreement had not been adhered to although the Deputy Commissioner had been prepared to continue to agree to the adjournment of the winding up proceedings. There were a number of supporting creditors who were owed about $2 million in total. The applicant had paid all outstanding rent. It was a condition of the injunction restraining the respondent from re-entering the Premises that the applicant pay rent weekly in advance. Held: (1) The application for relief against the forfeiture of the Lease is dismissed. (2) Relief against forfeiture is a remedial order imposed by the Court. It should be determined at the date of the hearing by reference to the events and circumstances then existing. The task of the Court is to determine whether the exercise of the landlord’s legal right to terminate is, in all the circumstances, unconscionable. It is wrong to approach the matter as depending on the balance of convenience: Musico Corporation Pty Ltd v Master Truck Service Pty Ltd [2025] NSWSC 1226 applied. (3) Relief against forfeiture may be granted by the Court in its equitable jurisdiction. The equitable basis upon which the Court will intervene is unconscionability on the part of the landlord to insist upon its legal right to re-enter: Primary Re Limited v Great Southern Property Holdings Limited (Receivers and Managers Appointed) (in liq) [2011] VSC 242 applied. Relief may be granted where the primary object of the bargain was to secure a stated result which can be effectively obtained when the matter comes before the Court and where the forfeiture provision is added by way of security to produce that result: Shiloh Spinners Ltd v Harding [1973] AC 691 applied. (4) The right of re-entry in the event of existence of a winding up petition against the applicant is security for future non-payment of rent and the risk that if payments are made, they will have to be disgorged as undue preferences if a winding up order is subsequently made: Direct Food Supplies (Victoria) Pty Ltd v D.L.V. Pty Ltd [1975] VR 358; Melacare International Ltd (in receivership) v Daley Investments Pty Ltd [1999] NSWSC 496 considered. (5) The default or more accurately, the existence of the event, namely the winding up petition, has not been remedied and still exists. The unremedied breach is not fatal to the application for relief, but is a factor suggesting that there was no unconscionability on the part of the respondent, particularly where there was uncertainty as to whether the default will be remedied: Lontav Pty Ltd v Pineross Custodial Services Pty Ltd [2011] VSC 485 applied. (6) The Lease was a commercial contract entered into by the applicant and the respondent and represented their allocation of risk. The Court should not lightly ignore the agreement of the parties and impose a lesser form of protection for the respondent: Kofoo Sussex Pty Ltd v Commerce Building Pty Ltd [2014] NSWSC 1079, Melacare International Ltd (in receivership) v Daley Investments Pty Ltd [1999] NSWSC 496 considered. (7) The applicant has demonstrated in the past a repeated failure to pay rent in a timely manner and only paid following the issue of a notice to remedy breach. Inferences are available that the failure to pay rent in a timely manner was deliberate and that rent will not be paid in accordance with the terms of the Lease in the future: Sneakerboy Retail Pty Ltd trading as Sneakerboy v Georges Properties Pty Ltd [2020] NSWSC 996 considered. (8) The termination and re-entry of the Premises was to secure rights under the Lease. It was not to secure an extraneous benefit, which would have made the exercise of the right unconscionable: Okami SA Newton Pty Ltd v Newton SC Pty Ltd [2024] SASC 151 distinguished. Retail and Commercial Leases Act 1995 (SA) s 68; Landlord and Tenant Act 1936 (SA) ss 9, 10, 11; Conveyancing Act 1919 (NSW) s 129, referred to. Musico Corporation Pty Ltd v Master Truck Service Pty Ltd [2025] NSWSC 1226; Shiloh Spinners Ltd v Harding [1973] AC 691; Lontav Pty Ltd v Pineross Custodial Services Pty Ltd [2011] VSC 485, applied. -- 2 of 31 -- Okami SA Newton Pty Ltd v Newton SC Pty Ltd [2024] SASC 151, distinguished. Melacare International Ltd (in receivership) v Daley Investments Pty Ltd [1999] NSWSC 496; Sneakerboy Retail Pty Ltd trading as Sneakerboy v Georges Properties Pty Ltd [2020] NSWSC 996 ; Hyman v Rose [1912] AC 623; Tanwar Enterprises Pty Ltd v Cauchi (2003) 201 ALR 359; Wilkinson v S & S Gikas Pty Ltd [2006] NSWSC 1314; Primary Re Limited v Great Southern Property Holdings Limited (Receivers and Managers Appointed) (in liq) [2011] VSC 242; Legione v Hateley (1983) 152 CLR 406; BCCM Group Pty Ltd v ASAP23 Pty Ltd [2022] SASC 141; Kofoo Sussex Pty Ltd v Commerce Building Pty Ltd [2014] NSWSC 1079; The Heat Group Pty Ltd v Paragan Care Limited [2021] VSC 204; Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110; Wynsix Hotels (Oxford St) Pty Ltd v Toomey [2004] NSWSC 236; Hayes v Gunbola (1986) 4 BPR 9247; Australian Mutual Provident Society v 400 St Kilda Road Pty Ltd [1990] VR 646; Duke of Westminster v Swinton [1948] 1 All ER 248; Baby Zone (Aust) Pty Ltd (Administrator Appointed) v Keira Street Ventures Pty Ltd [2016] NSWSC 528; Re FineTea Pty Ltd (Administrator Appointed) [2020] VSC 357; Re Hi-Fi Sydney Pty Ltd (Administrator Appointed) [2015] NSWSC 1312; Della Imports Pty Ltd v Birkenhead Investments Pty Ltd [1987] ANZ ConvR 294; Ace Property Holdings Pty Ltd v Australian Postal Corporation [2011] 1 Qd R 504; Direct Food Supplies (Victoria) Pty Ltd v D.L.V. Pty Ltd [1975] VR 358; Airservices Australia v Ferrier (1996) 185 CLR 483; Re Centaur Mining & Exploration Ltd (2008) 221 FLR 217, considered. -- 3 of 31 -- -- 4 of 31 -- DERRIMUT HEALTH & FITNESS P/L v ARETZIS PROPERTIES P/L [2025] SADC 131 Civil Introduction 1 The applicant, Derrimut Health & Fitness Pty Ltd (the applicant or Derrimut), has brought a claim seeking relief against forfeiture of a lease (the Lease) that it entered into on about 26 August 2019 for the lease of premises at shop 6, 1031-1037 South Road, Melrose Park, (the Premises). The respondent, Aretzis Properties Pty Ltd (the respondent or Aretzis Properties), is the lessor of the Premises. The applicant conducts a gymnasium business from the Premises. 2 On 20 August 2025, the respondent terminated the Lease and served on the applicant a Notice of Re-Entry. In exercising those rights, the respondent relied upon clause 19.1.4 of the Lease which permits the respondent, as lessor, to re-enter the Premises and repossess the Premises if a winding up petition is presented against the applicant in which event the Lease will be determinable. A winding up petition had been presented against the applicant by the Deputy Commissioner of Taxation (the Deputy Commissioner) on 25 June 2025.1 3 The applicant seeks relief against the forfeiture of the Lease on the basis of its contention that it is unconscionable for the respondent to exercise its right to terminate the Lease pursuant to clause 19.1.4 in circumstances where: (1) the winding up proceedings had not been determined and in the winding up proceedings, the applicant asserts and intends to prove that it is solvent; (2) the respondent formed the intention to force the applicant out of its rights as lessee and then acted opportunistically to evict the applicant in circumstances where it had determined to lease the Premises to a new tenant. 4 The respondent opposes the claim for relief against forfeiture. There is urgency in determining the matter as the respondent has entered into a new lease of the Premises with a third party which is subject to a condition that the respondent provide vacant possession of the Premises by 6 November 2025. 5 For the reasons which follow, the claim of the applicant for relief against forfeiture is dismissed. The Lease 6 The Lease was entered into by the applicant and the respondent on about 26 August 2019 for a period of 8 years commencing on 30 December 2019 and expiring on 29 December 2028, together with an option to renew for a period of 1 Exhibit R2, tab 80. -- 5 of 31 -- [2025] SADC 131 2 5 years, subject to the terms of the Lease. The rent payable under the Lease by the applicant was, at the commencement of the lease, the sum of $219,650 per annum and was payable monthly in advance. The rent was subject to review in accordance with the terms of the Lease. The permitted use under the Lease was a gymnasium, operating 24 hours a day and 7 days per week. 7 The Lease provides for determination and re-entry in the following circumstances: 19 TERMINATION AND RE-ENTRY 19.1 The Lessor may without notice to the Lessee of its intention so to do re-enter upon the Premises or any part of it in the name of the whole and repossess the Premises and if the Lessor does so, this Lease will be determinable without prejudice to the Lessor's rights in respect of any antecedent breach or non-performance by the Lessee of any of the covenants of this Lease in any one or more of the following events (but not otherwise): 19.1.1 if the Rent or any part of it or other moneys payable by the Lessee under this Lease remains unpaid for the period of fourteen (14) days after the Lessee has been notified in writing of the arrears; 19.1.2 if the Lessee fails to remedy any breach or non-observance by it of any other agreements or terms and conditions on its part contained in or implied by this Lease within fourteen (14) days of being required in writing by the Lessor so to do; 19.1.3 if the Lessee has any of its property in or upon the Premises lawfully seized or taken in execution of any judgment or other proceedings; 19.1.4 if the Lessee commits an act of bankruptcy or executes any document giving effect to an assignment, compromise or composition for the benefit of its creditors or (being a body corporate) has a winding upon petition presented against it or goes into liquidation voluntarily or compulsorily (except for the purpose of a reconstruction approved in writing by the Lessor) or a Receiver or a Receiver and Manager is appointed in respect of any part of the-Lessee's property or business. 8 Mr Nikolaos John Solomos, who is the sole director of the applicant, provided the respondent with a Deed of Guarantee and Indemnity whereby he guaranteed to the respondent the due payment by the applicant of all money due under the Lease and observance by the applicant of the terms of the Lease. Mr Solomos also agreed to indemnify the respondent against any loss that it might suffer as a result of the breach of the Lease or the non-observance by the applicant of any of the terms of the Lease. 9 McGees Property (SA) Pty Ltd (McGees) managed the Premises and the Lease on behalf of the respondent. -- 6 of 31 -- [2025] SADC 131 3 The trial 10 The case was largely documentary, although supplemented by the evidence from the witnesses that were called. Each party called one witness. 11 The applicant called their in-house legal counsel, Ms Nassour, to give evidence. Ms Nassour reported to Mr Solomos. She was not part of the finance department of the applicant. She became involved in the commercial dealings between the applicant and the respondent once a breach notice was issued. There was no issue with her credibility. The issue with her evidence concerned the extent to which she could give evidence about certain matters and the generality of her evidence. Ms Nassour gave evidence, which I accept, about the winding up proceedings and the negotiations with the Deputy Commissioner. She had the carriage of these matters on behalf of the applicant and was in a position to give that evidence. She also gave evidence about her discussions with the supporting creditors. The difficulty with her evidence on these topics was the weight that could be given to her evidence as to the intentions of the Deputy Commissioner and the supporting creditors. 12 Although solvency was strictly not in issue on the pleadings, Ms Nassour’s evidence touched upon that issue. The financial position of the applicant was in issue. It is clear that Ms Nassour was not in a position to give direct evidence about the financial position of the applicant or its solvency and that she relied on information from others when she expressed any opinions on this topic. She did not conduct any assessment herself of the applicant’s financial position. If the applicant sought more definitive findings concerning the issue of its solvency or the financial position, it would have needed to call an insolvency expert or at the very least called evidence from its accountant or chief financial officer. The applicant did not call that evidence. The applicant also did not call direct evidence from the financier which proposes to lend the sum of $60 million to the applicant and the group to refinance the group and payout the Deputy Commissioner and the supporting creditors. In the absence of that evidence, the Court is unable to form a conclusion about the likelihood of finance being obtained. 13 The respondent also called one witness, Mr Dimitrios Aretzis, who is its sole director and shareholder. He gave evidence about the history of the tenancy of the applicant including the repeated failure of the applicant to pay rent in a timely manner and in accordance with the terms of the Lease. That evidence was not challenged and can be accepted. Mr Aretzis also gave evidence about the circumstances in which the respondent terminated the Lease and entered into a new lease with a new tenant which is subject to vacant possession being given over the Premises. The objective circumstances surrounding these events was not the subject of challenge. What was in controversy were the matters that motivated Mr Aretzis to act and terminate the Lease. I will deal with that issue when dealing with the factual background. I otherwise accept his evidence. -- 7 of 31 -- [2025] SADC 131 4 Factual background 14 The applicant is a health and fitness provider that operates in South Australia and Victoria. It operates about twenty-six gymnasiums in locations throughout these States, including from the Premises. The applicant provides associated fitness services at the premises from which it operates. The applicant regarded the Premises as its flagship gymnasium in South Australia and has about 6,500 members that use the Premises. Ms Nassour gave evidence about these matters which was not challenged. Applicant’s past history of late payments 15 The applicant has a very poor record of paying rent on time. The respondent issued notices to remedy breach for failure to pay rent on numerous occasions including on 13 January 2021, 15 November 2021, 15 September 2022, 17 April 2023, 17 May 2023, 6 June 2023, 4 March 2024, 6 June 2024, 11 July 2024, 5 August 2024, 5 September 2024, 8 October 2024, 6 November 2024, 9 December 2024, 7 February 2025, 11 March 2025, 10 April 2025, 6 May 2025, 10 June 2025, 8 July 2025 and 5 August 2025. The applicant did not challenge that evidence or proffer any explanation for the continued late payments. In these circumstances, it is a reasonable inference that the applicant was in the practice of deliberately breaching the terms of the Lease by making late payments. Winding up proceedings 16 The findings set out below are made from the documents filed in the Federal Court winding up proceedings and the evidence of Ms Nassour. They are not in dispute. 17 On 2 April 2025, the Deputy Commissioner issued a statutory demand to the applicant in which it demanded payment of the sum of $15,023,986.48. The applicant did not pay the amount demanded or take any step to set aside the demand. The applicant did file an originating application for judicial review with the Federal Court asserting that the Commissioner ought to have accepted a payment proposal made by the applicant. That application was later dismissed. The communications with the Australian Taxation Office (ATO) indicated that the applicant had a poor history of complying with payment plans. 18 On 25 June 2025, the Deputy Commissioner issued a winding up petition against the applicant in the Federal Court on the grounds of insolvency. A number of other creditors have appeared at the hearings as supporting creditors. These supporting creditors included Return to Work Corporation of South Australia, Fitness Equipment Finance Pty Ltd, Bench Fitness Australia Pty Ltd and Melbourne United Basketball Pty Ltd. Ms Nasour gave evidence that about $800,000 was currently owed to Fitness Equipment, $200,000 to Melbourne United and that she could not recall the amount owed to Bench Fitness. Bench Fitness’s notice of appearance in the Federal Court stated that the sum of $597,610 was owed to it. The notice of appearance of Return to Work in the Federal Court indicated that it was owed $60,190.24 by the applicant. -- 8 of 31 -- [2025] SADC 131 5 19 The applicant filed a notice of appearance on 11 August 2025 in the winding up proceedings in which it did not specify any grounds of opposition to the winding up. On 21 August 2025, the applicant filed a further notice of appearance which stated that it opposed the application for winding up on the ground that it is solvent. The winding up proceedings have been adjourned from time to time. The last hearing (as at the time of the trial) was held on 16 October 2025 at which time the proceedings were adjourned to 30 October 2025. The winding up proceedings are still extant. 20 Under s 459C of the Corporations Act, for the purposes of the winding up application, a party that has failed to comply with the terms of the winding up notice is presumed to be insolvent. The onus in the winding up proceedings will therefore fall upon the applicant to prove that it is solvent. Ms Nassour, on behalf of the applicant, instructed the solicitors acting for the applicant in the winding up proceedings to lodge the notice asserting solvency. She did not have personal knowledge of the solvency of the applicant but relied upon advice from the applicant’s accountant that it was solvent. In the absence of evidence from that accountant or anyone with detailed knowledge of the applicant’s financial position, including its chief financial officer, this Court cannot find that there was a reasonable basis for the opposition to the winding up proceedings on the ground of solvency. No positive evidence of solvency was tendered by the applicant. 21 The applicant has been engaged in negotiations with the Deputy Commissioner and the supporting creditors. Ms Nassour gave the following evidence about the in principle agreement that had been reached between the applicant and the Deputy Commissioner. I accept that evidence. The in principle agreement is recorded in a document, signed on behalf of the applicant and the Deputy Commissioner, headed ‘Terms of Settlement’, and dated 9 September 2025.2 The Terms of Settlement record: (1) related companies to the applicant will charge and execute mortgages in favour of the Deputy Commissioner; (2) by 11 September 2025, Mr Solomos will provide a letter from a financier stating that the financier will provide finance by 28 November 2025 of at least $24 million and those funds will be used to pay the tax debts to the Deputy Commissioner; (3) the parties will take all steps to discontinue or dismiss the proceedings by 18 September 2025; (4) by 28 November 2025, all tax debts (of the group, including the applicant) to the Commissioner will be paid in full which are estimated to be $24.3 million. 2 Exhibit A6. -- 9 of 31 -- [2025] SADC 131 6 22 Ms Nassour gave evidence that a letter from the financier has been provided stating that it will endeavour to provide finance but it is subject to certain conditions being satisfied. It is therefore not an unconditional offer of finance. She said that the financiers will not provide an unconditional offer until or at about the time that they release the funds. The Deputy Commissioner has been prepared to continue to adjourn the proceedings. The proceedings as at the date of the hearing have been adjourned to 30 October 2025. Ms Nassour said that the financier has previously provided finance to the applicant for separate matters and the applicant is confident that the financier will provide this funding. If the funding becomes unconditional, the sum of $60 million will be advanced for the restructure of the whole group. 23 It is not possible on the evidence before this Court to make a finding as to the likelihood of the funding being provided and the debts of the Deputy Commissioner and the supporting creditors being paid. Ms Nassour gave evidence that she thought that it was likely that the finance would be obtained. Conditional approval had been obtained from the financier but there was no evidence about those conditions or the likelihood that they would be satisfied. No evidence was provided from the financier, either oral or documentary. The applicant could only submit that the financier had indicated realistic conditions. 24 It follows that the Court is not in a position to make a finding about the likelihood that the in principle settlement of the winding up proceedings between the applicant and the Deputy Commissioner will be effective in resolving the winding up proceedings. The agreement is dependent on the financier providing finance of at least $24 million by 28 November 2025. The terms of the in principle agreement have not been complied with in that the applicant has not provided an unconditional letter from the financier by 11 September 2025 or at all. There was no evidence from the ATO about their position in relation to the settlement agreement other than it has been prepared to date to adjourn the winding up proceedings. There was no evidence about how the supporting creditors would be repaid from the refinancing or how the proceeds of the refinancing would be distributed. There was no evidence from the supporting creditors as to how long they would be prepared to wait to be paid. Solvency 25 Solvency was not directly in issue in these proceedings. The parties therefore did not adduce the necessary evidence to enable the Court to make a definitive determination of solvency. In particular, the applicant’s ability to have access to funds was not the subject of evidence. 26 However, the evidence suggested that at the date of the presentation of the petition by the Deputy Commissioner on 25 June 2025 and on 20 August 2025 (when the Lease was terminated) it was at least likely that the applicant was not solvent. I make this finding based on the following evidence: -- 10 of 31 -- [2025] SADC 131 7 (1) the aged payable summary of the applicant shows aged creditors (i.e. creditors beyond 90 days) in the sum of $4.909 million; (2) in the period from 3 June 2025, the applicant has been consistently in default of its rental obligations in respect of a number of its properties, although not for large sums of monies. The applicant for a period of over 2 years did not pay the respondent rent on the due date; (3) the applicant did not pay the sum of $15,023,986.40 which was demanded by the Deputy Commissioner in the statutory demand issued on 2 April 2025. The Deputy Commissioner had rejected payment plans that had been proposed by the applicant; (4) the Deputy Commissioner issued the winding up petition on 25 June 2025. At that time, the applicant had paid, or was entitled to credits, in the sum of $3,357,746.92 such that as at 24 June 2025, the sum of $11,666,239.56 was outstanding; (5) throughout September 2025, the applicant owed the Deputy Commissioner over $12 million; (6) Melbourne United filed a notice of appearance as a supporting creditor in the winding up proceedings indicating that it was owed $222,918.50; (7) Return to Work Corporation of South Australia filed a notice of appearance as a supporting creditor in the winding up proceedings indicating that it was owed $60,190.24; (8) Fitness Equipment Finance Pty Ltd filed a notice of appearance as a supporting creditor in the winding up proceedings indicating that it was owed $631,427.98. An affidavit filed on behalf of Fitness Equipment Finance Pty Ltd on 30 September 2025 deposed to this debt increasing to $1,111,062.43 as at that date; (9) Bench Fitness Australia Pty Ltd filed a notice of appearance as a supporting creditor in the winding up proceedings indicating that it was owed $597,610.53; (10) AGL Sales Pty Ltd filed a notice of appearance as a supporting creditor in the winding up proceedings indicating that it was owed $113,941.24; (11) the profit and loss statement for the applicant for the year ending 30 June 2024 showed a loss of $5.818 million and the statement for the year ending 30 June 2025 showed a loss of $1.717 million; and (12) the in principle agreement with the Deputy Commissioner made on 9 September 2025 indicated that $24 million was required, as part of a refinancing, to pay the Commissioner. -- 11 of 31 -- [2025] SADC 131 8 27 There was no evidence adduced by the applicant that countered that evidence. 28 For the same reasons, it appears that the solvency of the applicant as at the date of hearing is dependent on the obtaining of finance from the proposed financier or from some other source. Issuing of Notice to Remedy and Notice of Re-Entry 29 The circumstances that gave rise to the issuing by the respondent of the notice to remedy breach on 5 August 2025 and the notice of re-entry dated 20 August 2025 are not in dispute although the motivations of the respondent in issuing those notices are a matter of dispute. The objective circumstances are either admitted on the pleadings or are the subject of evidence from Mr Aretzis which was not contentious. I make the following findings: (1) in early July 2025, Mr Aretzis received advice from various real estate agencies that the ATO was taking steps to place the applicant into liquidation. Mr Aretzis was told that other landlords were seeking to terminate their leases with the applicant. (2) in late July 2025, Mr Aretzis and McGees had a conversation about obtaining a new tenant. Mr Aretzis gave evidence that he had never had a vacancy at the Premises. By this time, Mr Aretzis was aware of the winding up notice issued against the applicant. (3) on 1 August 2025, McGees, on behalf of the respondent, met with the new tenant to discuss a proposed lease of the Premises. That fact was admitted on the revised pleadings. (4) on 4 August 2025, Mr Aretzis met with McGees and was advised by McGees that the new tenant was interested in taking a lease of the Premises. Mr Aretzis gave evidence about these matters and the fact of the meeting was admitted on the pleadings. (5) on 5 August 2025, the respondent served on the applicant a notice to remedy breach for the non-payment of rent requiring the breach to be remedied by 19 August 2025. That fact is admitted on the pleadings. Mr Aretzis gave evidence that the reason that the notice was served was because he had not received the rent that was due and the applicant was therefore in breach of the terms of the Lease and that the issuing of the notice had nothing to do with the proposed new tenant. Mr Aretzis said it had been the common practice of the respondent to issue notices to the applicant because they had not paid the rent on the due date. (6) on 7 August 2025, the new tenant provided a written proposal to McGees. This was admitted on the pleadings. -- 12 of 31 -- [2025] SADC 131 9 (7) on 13 August 2025, Mr Aretzis, on behalf of the respondent, met with McGees and the new tenant to discuss the new tenant’s proposal to lease the Premises. The proposed rent that would be payable by the new tenant was discussed at that meeting. The rent was greater than that being paid by the applicant. Mr Aretzis gave evidence about these matters and the meeting was admitted on the pleadings. (8) the new tenant provided an Agreement to Lease and a Disclosure Statement on 15 August 2025. The Agreement to Lease was subject to vacant possession being obtained by 30 October 2025 (that date has now been extended to 6 November 2025). The rent payable under the Agreement to Lease was $262,350 per annum plus GST. The new tenant was aware that the ATO had a petition to wind up the applicant. Mr Aretzis gave evidence about these matters. (9) on 15 August 2025, the new tenant paid a deposit of $26,987.94. Mr Aretzis gave evidence about this payment which was also admitted on the pleadings. (10) Mr Aretzis gave evidence that he had received enquiries from other agents advising him that they had potential tenants that would be interested in taking a lease of the Premises if it becomes available. (11) the respondent signed the Agreement to Lease on 19 August 2025. The respondent signed the Agreement to Lease prior to the expiry of the period of time to pay the outstanding rent which was specified in the Notice to Remedy Breach. (12) by the close of business on 19 August 2025, the respondent had not remedied the breach of the Lease by paying the outstanding rent. This fact was admitted on the pleadings. (13) on 20 August 2025, the applicant paid the outstanding rent that was required under the Notice to Remedy. Mr Aretzis gave evidence about this payment which was also admitted on the pleadings. (14) on 20 August 2025, the respondent had arranged for a sheriff to attend at the Premises to change the locks. The applicant paid the outstanding rent when it was advised that the sheriff was in attendance at the Premises. As a consequence, the sheriff did not proceed to change the locks. Mr Aretzis said that at that time he had decided to terminate the Lease. (15) on 20 August 2025, after the payment of the outstanding rent, the respondent issued the Notice of Re-Entry, based on the winding up petition. Mr Aretzis gave evidence that it was not until the rent was paid on 20 August 2025 that he was advised that there was another clause in the Lease that permitted re-entry based on the existence of the winding -- 13 of 31 -- [2025] SADC 131 10 up petition. He said that he made this decision based on the applicant’s consistent failure to pay rent on time over the past 5 years and that he had previous experiences of receivers stepping in and only receiving a few cents in the dollar. In re-examination, he expanded on these matters and said further that the commercial decision that he made to terminate the Lease was based on the deterioration of the tenancy including the reduction in trading hours and the reduced stock being sold by the applicant out of the Premises, other premises from which the applicant operated being closed down or the landlords of those premises terminating the lease, the frequent changes in the chief financial officer of the applicant and the aggressive and threatening conduct of Mr Solomos. Mr Aretzis said that he made the commercial decision to terminate the Lease because the opportunity arose because of the ATO winding up petition. He said that he did not want to be in the position of getting only a few cents in the dollars and only getting paid the rent if they were about to send the sheriffs in to change the locks. 30 The applicant issued these proceedings for relief against forfeiture on 22 August 2025. At that time, the respondent had served the notices of re-entry and termination but had not physically re-entered the Premises. On that date, the Court ordered an interim injunction up until 29 August 2025 that the respondent be restrained from taking any further steps to terminate the Lease and re-enter the Premises. On 29 August 2025, that order was extended until further order. 31 Mr Aretzis gave evidence that prior to 20 August 2025 it was the respondent’s preference that the applicant remain as the lessee of the Premises and pay the rent but that it had a fallback position if the applicant went ‘bust’. Mr Aretzis denied that he had formed the view prior to 20 August 2025 that he wanted the Lease terminated and to re-enter the Premises. Reasons of the respondent for terminating the Lease and re-entering the Premises 32 As to the motivations of the respondent, I make the following findings. First, by no later than 15 August 2025 and possibly earlier, the respondent had made a decision that it did not wish the applicant to continue as the lessee of the Premises and wished them to be replaced by the new tenant. I have made this finding because: (a) on 15 August 2025, the new tenant signed the Agreement to Lease; (b) on the same date, the new tenant paid a significant deposit for that lease; (c) the respondent counter signed the Agreement to Lease on 19 August 2025; and (d) on 20 August 2025, the respondent moved immediately to change the locks and was only thwarted from re-entry on the ground of the failure -- 14 of 31 -- [2025] SADC 131 11 to pay rent by the actions taken by the applicant to then immediately pay the rent. 33 Secondly, the respondent formed the view that because of the non-payment of rent and the long history of non-payment and the fact that there was a winding up petition against the applicant, it would act immediately if the rent was not paid within the 14 days provided for in the Notice to Remedy Breach. I make this finding because: (a) the evidence from Mr Aretzis that both of these matters were relevant considerations when the respondent re-entered; and (b) Mr Aretzis was aware of the winding up proceedings and had a past history of only receiving cents in the dollar in a winding up or receivership. 34 I do not find that the respondent had formed the view prior to 20 August 2025 that it would terminate the Lease on the ground that there was a winding up petition against the applicant. There is no direct evidence that the respondent held this view. It is contrary to the evidence of Mr Aretzis. The short period between the time in which it became apparent that the respondent could not rely upon the applicant’s failure to pay rent and the notice of re-entry is evidence from which an inference could be made that the respondent had already been determined that it would re- enter based on the winding up petition. However, it is equally consistent with the respondent receiving further advice as to the options open to it. On the available evidence, I do not consider that it is more probable than not that the respondent had formed the intention to terminate the Lease and re-enter the Premises on the grounds of the winding up petition prior to 20 August 2025. Legal principles 35 The applicant has invoked the equitable jurisdiction of the Court as the basis for its claim for relief against forfeiture. It has expressly disavowed reliance upon the statutory jurisdiction that is provided for under s 68 of the Retail and Commercial Leases Act 1995 (SA) which permits reinstatement of rights under a retail shop lease that has been terminated. The applicant also did not plead or place reliance on ss 9 to 11 of the Landlord and Tenant Act 1936 (SA). Relief under the Landlord and Tenant Act may be granted by the Supreme Court. If an application had been made to the Supreme Court, an issue would have arisen as to whether relief could be granted in circumstances where the right of re-entry was not consequent upon a breach of the lease (but rather the existence of a fact). The applicant had expressed the view that relief would not have been available from the Supreme Court because such relief operated to relieve a tenant from a breach of the terms of the Lease and there was no breach in this case. In Melacare International Ltd (in receivership) v Daley Investments Pty Ltd,3 Bryson J expressed the view that s 129 of the Conveyancing Act (which is similar in its terms 3 [1999] NSWSC 496 [12]. -- 15 of 31 -- [2025] SADC 131 12 to ss 10 and 11 of the Landlord and Tenant Act) applied only to cases where there was a breach of a term of the lease and not to a circumstance where the right of re- entry was not consequent upon the breach of a term. Subsequent cases have cast doubt on the correctness of that conclusion.4 However, this is not a matter that the Court needs to determine in these proceedings. 36 There is no doubt that relief against forfeiture may be granted by the Court in its equitable jurisdiction.5 The equitable basis upon which the Court will intervene to grant relief is unconscionability on the part of the landlord to insist on its legal right to re-enter.6 In Shiloh Spinners Ltd v Harding,7 Lord Wilberforce stated that where the primary object of the bargain was to secure a stated result which can effectively be attained when the matter comes before the court and where the forfeiture provision is added by way of security for the production of that result, relief may be granted in appropriate cases. In Hyman v Rose, Lord Lawburn LC spoke of a party not taking advantage of a breach by forfeiture of the lease from which they are not commensurately and irreparably damaged.8 37 It follows that I do not accept the respondent’s submission that relief is only granted in cases involving fraud, accident, surprise or mistake. The passage relied upon by the respondent for that proposition comes from Tanwar Enterprises Pty Ltd v Cauchi9 where the court makes it clear that those matters do not exhaustively set out the circumstances in which equity might intervene.10 38 The granting of relief against forfeiture is discretionary and not of right.11 In Wilkinson v S & S Gikas Pty Ltd (Wilkinson),12 Campbell J held: The granting of relief against forfeiture is discretionary. In relation to a lease, the principle that is generally applied is that the power to re-enter or forfeit for non-payment of rent is regarded as being in substance security for the rent. Provided the lessor and other persons concerned can be put in the same position as before the forfeiture or re-entry, the Court will usually grant relief against forfeiture upon payment of rent, costs, interest and other expenses: Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of New South Wales Ltd (1970) 2 BPR 9562. If those terms are offered, it is only in a rare case that the Court would refuse relief against forfeiture. The principle on which that is done is that, once the 4 See for example, Re Hi-Fi Sydney Pty Ltd (Administrator Appointed) [2015] NSWSC 1312 [18]; Della Imports Pty Ltd v Birkenhead Investments Pty Ltd [1987] ANZ ConvR 294. 5 Okami SA Newton Pty Ltd v Newton SC Pty Ltd (Okami) [2024] SASC 151 [16]. 6 Primary Re Limited v Great Southern Property Holdings Limited (Receivers and Managers Appointed) (in liq) [2011] VSC 242 [183] citing Lord Wilberforce in Shiloh Spinners Ltd v Harding [1973] AC 691, 721-725 and endorsed by the High Court in Legione v Hateley (1983) 152 CLR 406,444; BCCM Group Pty Ltd v ASAP23 Pty Ltd [2022] SASC 141 [48]. 7 [1973] AC 691, 721-725. 8 [1912] AC 623, 631. 9 (2003) 201 ALR 359 [58]; [2003] HCA 57. 10 Okami [2024] SASC 151 [16]. 11 Sneakerboy Retail Pty Ltd trading as Sneakerboy v Georges Properties Pty Ltd (Sneakerboy) [2020] NSWSC 996 [75]. 12 [2006] NSWSC 1314; (2006) 12 BPR 98,207 [23] and [24];. Quoted with approval in Sneakerboy at [69]. See Okami [16] for a similar statement. -- 16 of 31 -- [2025] SADC 131 13 landlord has got all that the right of re-entry was, in equity's eyes, security for, it would be unconscionable for the landlord to insist on its legal right to re-enter. 39 There are not rigid rules for the exercise of that discretion.13 Relevant discretionary matters that will favour a refusal of relief include the futility of granting relief (as demonstrated above) or insolvency of the tenant,14 whether the default was wilful, the gravity of the breach and the damage that might be suffered by the landlord if relief is granted.15 There must be a reasonable expectation that the tenant will honour its obligations in the future.16 Delay in making the application for relief against forfeiture can be a relevant consideration.17 Delay is not a relevant matter in the present application as the applicant instituted proceedings for relief against forfeiture on 22 August 2025, two days after the respondent serve the notice of re-entry. 40 The equitable jurisdiction to grant relief has been described as robust. In Kofoo Sussex Pty Ltd v Commerce Building Pty Ltd (Kofoo Sussex),18 Robb J held: It may be said of the equity to relieve against forfeiture that it is a relatively robust equity. It is available to protect defaulters, and survives proof of a propensity to default. It is not particularly solicitous of the interests of third parties, unless the third parties acquire a leasehold interest in the property with no actual or constructive notice that a prior lessee may have a right to apply for relief against forfeiture, even though the prior lessee may not have acted in an expeditious way to obtain the relief. But the availability of the relief remains an established doctrine of Equity. Little knowledge of the circumstances that have existed over previous centuries in England is required in order to understand the reasons for the development of the equity. It remains attractive in the modern world as it provides succour to susceptible lessees who are down on their luck. However, there is a case to be made that Equity should think carefully about how the doctrine is to be applied in truly commercial contexts. 41 In cases involving non-payment of rent, the approach is that the right of re- entry is to be regarded as security for the payment of rent. If the rent is paid and the landlord is put back in the same position, then it will be rare or exceptional not to grant relief. In such cases there is a heavy burden on the lessor to establish that relief against forfeiture should not be granted.19 If compliance with the agreement can be achieved without forfeiture, relief will generally be granted.20 42 The security granted by the right of forfeiture is not security in the sense of conferring a charge or similar interest to secure payment but rather in the sense of bringing about the payment. These principles are evident from the passages 13 Hyman v Rose [1912] AC 623, 631. 14 Sneakerboy at [75]. 15 Shiloh Spinners Ltd v Harding [1973] AC 691, 721-725. 16 Primary Re Limited v Great Southern Property Holdings Limited (Receivers and Managers Appointed) (in liq) [2011] VSC 242 [183]. 17 Kofoo Sussex Pty Ltd v Commerce Building Pty Ltd (Kofoo Sussex) [2014] NSWSC 1079 [143]. 18 [2014] NSWSC 1079 [139]. 19 Hace Corporation Pty Ltd v F Hannan (Properties) Pty Ltd [1995] 7 BPR 14,326. 20 Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110, [39]. -- 17 of 31 -- [2025] SADC 131 14 referred to above in Wilkinson and Sneakerboy21 and from the decision The Heat Group Pty Ltd v Paragan Care Limited (the Heat Group).22 The unconscionability will arise because the landlord is exercising a right available to it under the Lease when the exercise of that right is not needed to protect its legitimate interests and therefore must be considered to be exercised for an ulterior or unnecessary purpose or is disproportionate. 43 The rare or exceptional cases where relief may not be granted even though the rent has been paid up to date might arise where the tenant is hopelessly insolvent23 (as the grant of relief in such a case might be regarded a futile) or where there have been previous lengthy defaults in the payment of rent (as that permits an inference to be drawn that the rent will not be paid in the future or at least will not be paid for some considerable time).24 In Kofoo Sussex, Robb J referred to authorities that held relief against forfeiture may be granted even where there was evidence of reasonably based concerns of the ability of the lessee to comply with the financial obligations under the lease25 (including where the lessee had entered into a scheme or arrangement with its creditors) or where there were serious concerns as to the lessee’s ability to pay rent in the future26 or even where it is insolvent.27 The basis of these decisions is the principle that equity regards forfeiture of the lease as the ultimate security mechanism to ensure compliance with the agreement and if that can be achieved without forfeiture, relief will be granted.28 44 Previous default, including late payment of rent is a relevant matter to take into account when the court comes to exercise its discretion.29 The late payment of rent may impact on a landlord’s ability to meet their own debts and may cause administrative inconvenience.30 However, the court will usually grant relief where the outstanding rent will be paid, notwithstanding that there has been a history of some delinquency in the timely payment of rent.31 45 There are some specific matters that arise in the context of this claim for relief. 46 First, the breach (or in this case, the circumstance giving rise to the right of forfeiture) has not been remedied. In the usual case, the breach will have been 21 [2006] NSWSC 1314; [2020] NSWSC 996 [67]-[70], respectively. 22 [2021] VSC 204 [11]. 23 Sneakerboy at [70] citing P Butt Land Law (Thomson Reuters, 6th ed, 2010), [15223]-[15225]. 24 The Heat Group [2021] VSC 204, [11]. 25 [2014] NSWSC 1079 [136] citing Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110 [36] and [37]. 26 Ibid. 27 Ibid citing Wynsix Hotels (Oxford St) Pty Ltd v Toomey [2024] NSWSC 236 [32] and Hayes v Gunbola (1986) 4 BPR 9247, 9250-9251. 28 Kofoo Sussex at [136] citing Twinside Pty Ltd v Venetian Nominees Pty Ltd at [36] and [37]; Sneakerboy at [73]. 29 Sneakerboy at [78]. 30 Ibid. 31 Ibid at [110]. -- 18 of 31 -- [2025] SADC 131 15 remedied. That is not the case in these proceedings as the winding up proceedings remain on foot and have not been terminated or dismissed. In Lontav Pty Ltd v Pineross Custodial Services Pty Ltd (Lontav),32 Dixon J held that an unremedied breach may not be fatal to an application. That is because relief may be granted on conditions that will ensure that the terms of the lease will be observed, despite the existing breach and that the parties are placed in the same position as if the terms of the lease had been observed.33 Dixon J in Lontav referred to a number of cases where relief was granted despite continuing breaches. They were: (1) Australian Mutual Provident Society v 400 St Kilda Road Pty Ltd34 where there was an ongoing breach of a clause that prohibited sub-letting without consent; (2) Hyman v Rose35 where the on-going breach was a failure to comply with a notice to repair and the House of Lords considered that relief could be granted on the condition that the appellants deposit a sufficient sum to secure restoration of the building to its former condition at the end of the lease; and (3) Duke of Westminster v Swinton36 where relief was granted where the applicant had contravened the terms of the lease by sub-letting the premises without consent and making structural alterations without consent. Relief was granted to the lessee on the basis that the premises be restored within a period of 2 years, a period of time that was within the term of the lease. Relief was not granted to the sub-lessee because his breach was deliberate. 47 In Lontav, Dixon J reviewed these cases and held that relief may be granted, despite a continuing breach, if there is no practical disadvantage to the landlord if the breach remains until, but not beyond the end of the term of the lease. In Lontav, Dixon J held that it was not probable that the breach would be remedied by the end of the term and therefore the primary object of the bargain would not be secured for the benefit of the landlord. Relief was therefore refused. 48 It follows from the above analysis that, contrary to the submission of the respondent that the failure to remedy the default (or, in this case, the continued existence of the event) is not fatal to the application for relief. It will however be a relevant matter. 49 Secondly, it follows from the above discussion that relief may be granted on conditions. In Kofoo Sussex, Robb J quoted with approval a passage from P Butt, Butt’s Land Law, that the court can impose terms on the grant of relief against forfeiture and may, for example, in addition to requiring a successful tenant to pay the arrears of rent, require the landlord’s costs of the proceedings to be paid and for future payments of rent to be made by standing order with a bank.37 In Hyman v Rose,38 which was referred to in Lontav,39 the House of Lords imposed a condition 32 [2011] VSC 485 [55]. 33 Ibid. 34 [1990] VR 646, 672. 35 [1912] AC 623. 36 [1948] 1 All ER 248. 37 [2014] NSWSC 996 [114] citing P Butt, Butt’s Land Law (Thomson Reuters, 6th ed, 2010). 38 [1912] AC 623. 39 [2011] VSC 485 [57]. -- 19 of 31 -- [2025] SADC 131 16 that the appellants deposit a sufficient sum to secure the restoration of the building to its former condition at the end of the lease. 50 Thirdly, the court may be cautious about applying the doctrine of relief against forfeiture in a commercial context.40 The commercial context of the lease is therefore a relevant circumstance to consider by the court when exercising its discretion. In Kofoo Sussex, Robb J held that ‘there is a case to be made that Equity should think carefully about how the doctrine is to be applied in truly commercial contexts’. In Melacare International, Bryson J held that it was not unconscionable or inequitable to rely on a contractual right of termination.41 In Tamwar Enterprises Pty Ltd v Cauchi42 the High Court made it clear that courts should be reluctant to interfere with deliberately negotiated contractual rights. 51 Fourthly, the re-letting of the Premises to a third party is not a bar to granting relief against forfeiture.43 The importance of that circumstance, as a matter of discretion, will depend on whether the third party has acquired rights over the property without notice of the tenant’s claim. If the third party knew of the circumstances surrounding the forfeiture of the lease, then they may be taken to have notice of the tenant’s claim to seek relief and will take subject to that claim.44 Stanley J in Okami45 held that where the party knew of the relevant circumstances and had notice of the lessee’s claim to seek relief against forfeiture, relief may be granted. 52 Fifthly, the existence of a guarantee of the tenant’s obligations is a relevant matter, particularly in cases involving non-payment of rent. In The Heat Group,46 Forbes J held that relief is unlikely to be refused where the lease provides a guarantee to cover the tenant’s obligations. Robb J made the same observation in Sneakerboy.47 53 Sixthly, the Court has power, as part of its equitable jurisdiction, to grant relief against forfeiture, even though the claim does not relate to non-payment of rent or even a breach of lease by the applicant.48 The forfeiture of the Lease in the present proceedings was based on the occurrence of an event, namely the issuing of a winding up petition against the applicant. The basis of the intervention by equity in such cases is covered by the statement of Lord Wilberforce in Shiloh Spinners Ltd v Harding.49 In Re FineTea Pty Ltd (Administrator Appointed) 50 and 40 [2014] NSWSC 1079 [139]. 41 Melacare International [1999] NSWSC 496 [16]. 42 (2003) 217 CLR 315. 43 Melacare International [1999] NSWSC 496 [114] citing P Butt, Butt’s Land Law (Thomson Reuters, 6th ed, 2010). 44 Ibid. 45 [2024] SASC 151 [54]. 46 [2021] VSC 204,[11] citing Baby Zone (Aust) Pty Ltd (Administrator Appointed) v Keira Street Securities Pty Ltd [2016] NSWSC 528 [80]; Wynsix Hotels (Oxford St) Pty Ltd v Toomey at [33]. 47 [2020] NSWSC 996 [74] citing Wynsix Hotels (Oxford St) Pty Ltd v Toomey at [33]. 48 Melacare International [1999] NSWSC 496 [5], [10]. 49 [1973] AC 691, 721-725. 50 [2020] VSC 357 [64]. -- 20 of 31 -- [2025] SADC 131 17 Re Hi-Fi Sydney Pty Ltd (Administrator Appointed),51 the court applied the statement in Shiloh Spinners Ltd v Harding and held that there were three situations where equity would grant relief: first, where it is possible to state the object of the transaction and of the insertion of the right to forfeit is essentially to secure the payment of money; secondly, where there has been fraud, accident, mistake or surprise (the traditional heads of equitable jurisdiction); and thirdly, where the primary object of a bargain is to secure a stated result which can be effectively obtained when the matter comes before the court and where the forfeiture provision is security for the production for that result. The first and third categories of Shiloh Spinners Ltd have as their touchstone the principle that forfeiture is seen as a means of securing the bargain and not to provide the secured party with benefits over and above what is necessary to achieve that end and not to impose on the party giving security a penalty or sanction over and above the primary purpose of the bargain.52 The conduct of seeking relief over and above what is necessary gives rise to the unconscionability required to claim relief against forfeiture. Determination At what time is unconscionability determined 54 The date upon which the alleged unconscionability that is asserted by the applicant should be determined is in issue in these proceedings. The respondent submitted that as a matter of law and the pleaded case of the applicant the question of unconscionability should be determined by reference to the events and circumstances that existed at the date of the termination of the Lease, namely on 20 August 2025. The applicant submitted that the relevant date for determining unconscionability was the date of the hearing of these proceedings. 55 I do not accept the respondent’s submission as to when the alleged unconscionability is to be assessed. A claim for relief against forfeiture should be determined at the date of the hearing. If the court grants the relief, it does so on that date that it delivers judgment. There is no relief against forfeiture until the court makes an order. The order of the court is remedial. Remedial orders (similar to a remedial constructive trust) are orders that are imposed by the court and take effect from the date of judgment. Matters that occurred after the termination of the lease and in the period up to the hearing can be taken into account. For example, in the traditional claim for relief against forfeiture because of non-payment of rent, payments of rent after the termination are considered. The court forms a view as to the capacity of the applicant for relief, as at the date of the hearing, to meet future payments of rent. It is clear therefore that events and circumstances subsequent to the termination may be taken into account in determining whether to grant relief against forfeiture. 51 [2015] NSWSC 1312 [26]-[36]. 52 Re FineTea Pty Ltd (Administrator Appointed) at [64]; Re Hi-Fi Sydney Pty Ltd (Administrator Appointed) at [28]. -- 21 of 31 -- [2025] SADC 131 18 56 The pleaded case of the applicant was that it was unconscionable for the applicant to exercise its right to terminate the Lease in circumstances where: (a) the winding up proceedings had been commenced and not determined and the applicant asserted and intends to prove that it is solvent in those proceedings; and (b) the respondent had formed the intention to evict the applicant and had acted opportunistically to do so. 57 The respondent further submitted that by its pleading the applicant had limited itself to seeking relief against the termination of the Lease based on the circumstances that existed at that time. I accept that the applicant’s claim is directed to unconscionability in terminating the Lease. However, the evidence adduced by the applicant included matters that were clearly directed to matters after that time, namely the in-principle agreement with the Deputy Commissioner, the refinancing and the negotiations with the supporting creditors. This evidence was adduced without objection. 58 Counsel for the respondent properly conceded that he would not stand in the way of the Court having regard to the in-principle agreement and the applicant’s real case. At the same time, the respondent submitted that the applicant had not pleaded unconscionability that occurred after the date of termination of the Lease. The respondent submitted that the applicant should have pleaded that it was unconscionable for the respondent to continue to rely on the clause of the Lease permitting termination and re-entry on the existence of a winding up petition. 59 The applicant’s real case (as evident from the settlement agreement) was that it is likely that the winding up order will not be made (because it intends to prove that it is solvent) and therefore relief against forfeiture is appropriate. The parties have conducted the proceedings on the basis that the applicant was seeking relief against the re-entry based on the current state of the winding up proceedings and the events and circumstances that have occurred since the date of the termination of the Lease, including the in-principle agreement with the Deputy Commissioner, the refinancing being sought by the applicant, negotiations for the payment of the supporting creditors and the payment of rent since the termination of the Lease. As the applicant submitted, its pleading is directed, at least in part, to events after termination, by its plea that it intends to prove in the winding up proceedings that it is solvent. I do not consider that there is any prejudice to the respondent in determining the applicant’s claim by reference to the respondent’s continued reliance on the right of termination and re-entry based on the existence of the winding up petition by reference to the events and circumstances that existed as at the date of the hearing. I am conscious also a statement of claim is not always the best method to formulate a claim for relief against forfeiture where the circumstances may change frequently as further events occur. -- 22 of 31 -- [2025] SADC 131 19 60 In these circumstances, I propose to determine the matter on the basis that the applicant’s claim is that relief should be granted because the respondent’s continual reliance on the notice of termination and re-entry was unconscionable. The applicant’s case 61 The applicant submits that it is unconscionable for the respondent to insist upon its legal right of termination and re-entry and that the Court, as part of its equitable jurisdiction, should grant relief against forfeiture. The applicant submits that it will lose a valuable right, namely the Lease, if relief is not granted. It has a right under the Lease to occupy the Premises until 2028 with a right of renewal of a further 5 years. The applicant submits that the breach or, more accurately, the non-observance of the term of the Lease can be regarded as trivial and therefore the exercise of the right of termination is disproportionate to the loss that could be suffered by the respondent. The respondent will not be irreparably damaged if relief is granted. The applicant submitted that the rent was being paid and there was overwhelming evidence that refinancing would occur in the near future and the winding up proceedings dismissed with the Deputy Commissioner and supporting creditors paid. The applicant also contended that the respondent had acted opportunistically in that it had formed the intention to evict the applicant for non-payment of rent and enter into a new lease with the third party for an increased rent but when the rent was paid by the applicant, used another means to terminate the Lease and re-enter the Premises. 62 The applicant described the breach of the Lease as trivial. Although the existence of the winding up petition was not a breach of the Lease, I do not consider that it could be described as a trivial event. The winding up petition is an event that creates a substantial risk for the respondent. 63 The applicant also referred to the discretionary matters that it submitted favoured the granting of relief. It submitted that if relief is not granted, the business that it conducts from the Premises, including the trading of apparel and supplements, will likely be lost or at least severely disrupted. The applicant referred to the loss of members of the business and the business being the flagship gymnasium for the applicant’s business in South Australia. It submitted that none of these matters were contested. The respondent’s defence to the claim for relief against forfeiture 64 The respondent denies that the applicant is entitled to relief. It submits that it is entitled to rely on its contractual right to terminate the Lease. The respondent referred to the long history of the applicant making late payments of rent and the practice of the applicant only to make payment following the issue of a notice to remedy default. The respondent submitted that it did not now know and could not have known that the applicant was going to assert and intended to prove in the winding up proceedings that it was solvent as the applicant did not file until 22 August 2025 a notice of appearance in the winding up proceedings stating that it opposed the winding up proceedings on the basis that it was solvent. The -- 23 of 31 -- [2025] SADC 131 20 respondent also submits that the granting of relief would be futile as it could immediately terminate the Lease and re-enter the Premises based on the continued existence of the winding up petition. Approach of the Court 65 Parker J in Musico Corporation Pty Ltd v Master Truck Service Pty Ltd (Musico Corporation)53 made the point that in exercising its discretion as to whether or not to grant relief against forfeiture, the Court is not weighing up factors that may favour the granting of the relief and those that favour the refusal of relief. Parker J held that it was fundamentally incorrect to approach the matter as a matter depending on the balance of convenience between the parties as the Court would do in the hearing of an interlocutory application. Rather, the task of the Court in hearing a case for relief against forfeiture is to determine whether the exercise of the landlord’s legal right to terminate is, in all the circumstances, unconscionable.54 Some of the considerations that are relevant to an assessment as to whether the actions were unconscionable were referred to by Keane J (as he then was) in Ace Property Holdings Pty Ltd v Australian Postal Corporation55 as including the conduct of the applicant for relief, including whether the default was inadvertent or wilful, the gravity of the breaches, the damage to the lessor, the relative loss to the lessee and the disparity between the value of the property forfeited and the damage caused by the breach. These are all matters that go to whether, in the circumstances, insisting on the right to terminate is unconscionable, although they could be referred to as discretionary considerations. If the conclusion of the Court that the respondent’s conduct was unconscionable, it would be in rare cases that an order granting relief would not be made as a matter of discretion. The basis of the right to determine the Lease and re-enter because of the existence of the winding up petition 66 The first step in determining the claim for relief is to identify the purpose for the inclusion in the Lease of the right to determine the Lease and re-enter because of the existence of a winding up petition (which is not a breach of the lease). The existence of winding up proceedings have been a factor in a court’s refusal to grant relief against forfeiture for non-payment of rent. In Direct Food Supplies (Victoria) Pty Ltd v D.L.V. Pty Ltd56 Starke J found that the lessee would be unable to pay rent in the future or if it did, it may well have to disgorge such payments under winding up proceedings. This passage was quoted by Bryson J in Melacare International57 and Robb J in Sneakerboy.58 In Melacare International, Bryson J found that there were strong grounds for an apprehension that any payment which 53 [2025] NSWSC 1226 [122]-[124]. 54 Ibid. 55 [2011] 1 Qd R 504 [163]; [2010] QCA 55. Approved in Re Hi-Fi Sydney Pty Ltd (Administrator Appointed) [2015] NSWSC 1312 [27]. 56 [1975] VR 358, 360, 361. 57 [1999] NSWSC 496 [25]-[26]. 58 [2020] NSWSC 996 [71]. See also Baby Zone (Aust) Pty Ltd (Administrator Appointed) v Keira Street Ventures Pty Ltd [2016] NSWSC 528 [80]. -- 24 of 31 -- [2025] SADC 131 21 the lessor received for future rent may have to be disgorged later or perhaps sooner, under a liquidation or other insolvency arrangement. 67 Therefore, the right of re-entry in the event of there being a winding up petition against the applicant is security for future non-payment of rent (on the basis that there is a risk that they applicant may be insolvent) and further is security for the risk that if payments were made, they may have to be disgorged if a winding up order was subsequently made. In broad terms, the purpose of the right of re- entry in the event that there is a winding up petition is to protect the respondent from continuing in a relationship with a lessee who may be wound up.59 68 The applicant submitted that rent was being paid and was up to date and the risk of a preference claim was small because of the ultimate effect defence. Therefore, it contended that the rationale for the granting of relief was not applicable in the present case. 69 The task of the Court is to determine whether in light of the applicant’s payment of rent and the steps that have been taken to refinance which, if successful, will result in the likely dismissal of the petition, the resort by the respondent to its rights under the Lease to re-enter because of the existence of the winding up proceedings is unconscionable. It is therefore necessary to examine the position as to the future payment of rent and the prospects of a preference being recovered against the respondent if it received payments of rent and the applicant later went into liquidation. 70 As to the payment of rent, the respondent has been put back in the position that the right of entry is (in that aspect) security for. It is a condition of the injunction, preventing the respondent from taking any further step to re-enter the Premises, that the applicant pay rent weekly in advance. Save for one occasion when it was a day late in making payment, the applicant has since 22 August 2025 paid rent weekly in advance. The outstanding rent has been paid and rent is being paid seven days in advance (with the exception of the one occasion in which it was one day late). 71 The future payment of rent is dependent on the refinancing. If the refinancing does not occur, then there is a serious risk that rent will not be paid. The failure of the applicant to pay the Deputy Commissioner and supporting creditors suggests that the applicant is experiencing cash flow problems and is dependent on the refinancing to make those payments. 72 If the refinancing takes place, the winding up petition is dismissed and the Deputy Commissioner and the supporting creditors are repaid, it is not possible to determine whether there is a serious risk that the applicant will be unable to pay rent. There was no evidence as to how the proceeds of the refinancing would be distributed and whether they would be sufficient to remedy the cash flows 59 See Melacare International [1999] NSWSC 996 [17] for a similar expression concerning the appointment of a receiver. -- 25 of 31 -- [2025] SADC 131 22 problems of the applicant. It might be inferred that the refinancing is for the purpose of remedying the cashflow problems of the applicant. 73 It is not possible to make an assessment of the applicant’s solvency at the present time. It cannot be said that the applicant is now hopelessly insolvent or is likely to be unable to pay rent in the future. The Terms of Settlement with the Deputy Commissioner60 record that a financier is to provide at least $24 million to the applicant by 28 November 2025 (subject to certain conditions). Ms Nassour gave evidence that the financier is to provide $60 million as part of a restructure of the whole group. 74 Had the assessment of the solvency of the applicant been undertaken without the evidence of the refinancing, then I would have had serious doubts about the solvency of the applicant. 75 The applicant did not adduce any evidence as the likelihood of the refinancing occurring other than some general evidence from Ms Nassour that she believed that it would occur. There was no evidence from the financier. The conditions that were set by the financier for the refinancing were not in evidence and therefore the Court could not make any assessment as to the likelihood that these conditions would be satisfied. It was within the power of the applicant to adduce that evidence but it did not choose to do so. The Court therefore is unable to make an assessment on the likelihood of the refinancing taking place. The applicant’s contention therefore that the terms of settlement are close to being completed and the Deputy Commissioner and the supporting creditors are content with the current situation cannot be accepted on the evidence of the Court. 76 As to the possibility that payments of rent received by the respondent may have to be disgorged, it is not possible to determine whether any payments that the respondent receives while the winding up petition is still on foot will be recoverable by a liquidator of the applicant as an unfair preference under ss 588FA and 588FE of the Corporations Act in the event that the applicant is wound up. A claim by a liquidator for an undue preference against the respondent might be met by the ultimate effect defence as explained in Airservices Australia v Ferrier61 and Re Centaur Mining and Exploration Ltd (Re Centaur Mining).62 In Re Centuar Mining, Robson J applied the landlord’s defence and held that payment of rent to enable a company to retain the use of the premises where it carried on business, in circumstances where the landlord could take possession if the payments were not made, did not have the ultimate effect of disadvantaging creditors. 77 I find that there is a risk in the event that the applicant went into liquidation that payments of rent received by the respondent during the period of the winding up may have to be disgorged. 60 Exhibit A6. 61 (1996) 185 CLR 483. 62 (2008) 221 FLR 217. -- 26 of 31 -- [2025] SADC 131 23 Other relevant factors in considering claim for relief 78 The respondent submitted that there were a number of other factors relevant to the determination of the claim for relief against forfeiture and which favour the dismissal of that claim. 79 First, the respondent submits that granting the application for relief against forfeiture would be futile as there would be nothing that would prevent the respondent, if relief were granted, from again immediately terminating the Lease based on the continued existence of the winding up petition. The respondent submitted that the applicant had not applied for an injunction preventing it from exercising its rights. I accept that is the case, but if the respondent terminated the Lease again and re-entered the Premises, then it would be in all likelihood face a further application for relief against forfeiture. In such an event, the Court should not engage in speculation about the likely outcome of that further application. It cannot therefore be said that the present application for relief is futile. 80 Secondly, the respondent relies upon the prejudice of losing the opportunity to lease the Premises to the third party if relief is given. The proposed lease with the third party is subject to vacant possession being granted by 30 October 2025 (later extended to 6 November 2025). The prejudice that the respondent might suffer is two-fold. First, it loses the new tenant who is willing to step in almost immediately so that there would be no period without rent; and secondly, it loses the increased rental that the new tenant is willing to pay and the prospect of a better relationship with the tenant with no history of default. 81 As to the first matter, that is a relevant consideration. If relief is granted, but the applicant is subsequently wound up, then it is likely that there will be a period of time when the respondent does not receive rent for the Premises. That is the case even though the evidence from Mr Aretzis was that the respondent had not had difficulty in the past in attracting a tenant for the Premises. It is not likely that the new tenant will be prepared to continue to wait to commence the tenancy when it is not known when the winding up proceedings will be finalised and the Premises will become available. 82 As to the second matter, the respondent commenced negotiations with the third party prior to sending the Notice to Remedy Breach or terminating the Lease because of the winding up petition. It is therefore clear that when commencing the negotiations the Lease was still binding on the respondent and that any interest of the new tenant was subject to the existing Lease. Mr Aretzis admitted it was for this reason that a term in the new tenancy was that the lease was subject to vacant possession. The Agreement to Lease was signed by the new tenant and the respondent on 15 August 2025 and 19 August 2015, at which times the Lease had not been terminated. In these circumstances, the proposed re-letting of the Premises to the third party is not a bar to relief. As the respondent and third party knew of the circumstances surrounding the termination, they are taken to have -- 27 of 31 -- [2025] SADC 131 24 notice of the applicant’s claim to seek relief against forfeiture and will take subject to that claim.63 83 Thirdly, the respondent relies upon the history of late payments of rent that were made by the applicant. That delinquency frequently or even invariably required the respondent to issue Notices to Remedy Default. Over twenty notices of default have been issued by the respondent to the applicant for non-payment of rent. The principle that courts will normally grant relief against forfeiture provided the landlord is compensated for any loss from the non-payment will normally mean that a history of tardy payments is not in itself a ground for refusing relief.64 In the present case, the history of late payments demonstrates a deliberate disregard of the respondent’s rights by the applicant over a period of time and an unwillingness to pay rent on time without the respondent being forced to take action. The history of tardy payments is therefore a relevant matter but not determinative of the applicant’s claim for relief.65 84 Fourthly, the respondent relies upon the terms of the Lease and its right for the parties to be held to their bargain. In a commercial context, this factor has some weight as the final terms of the lease represents the negotiated agreement upon which the landlord grants the lease to the tenant and the tenant accepts that lease. The negotiated agreement represents the risk allocation agreed to and accepted by the parties. In this case, the clause permitting re-entry in the case of a winding up petition being issued against the applicant provided protection to the respondent from being required to continue in a relationship with a lessee who was subject to winding up proceedings. That was the agreement that was reached between the parties. To grant relief would increase the risk of loss to the respondent. This is therefore a factor in favour of a finding that there is no unconscionability on the part of the respondent in terminating the Lease. 85 Fifthly, some of the matters raised by the respondent are not relevant to the issue of unconscionability or discretion to be exercised by the Court. I consider matters such as Mr Solomos’ attitude to the respondent, the hours of operation of the business, the lack of stock and the condition of the Premises fall into this category. 86 The applicant suggested that the respondent may receive the benefit of the fit out if relief against forfeiture was not granted. The evidence of Mr Aretzis was that any fit out undertaken by the applicant was relatively minimal and not of any value to the respondent. I do not consider that to be a relevant matter in determining whether or not to grant relief. 87 As referred to earlier in these reasons, some of the matters raised by the applicant are more properly regarded as matters that might be relevant to the balance of convenience on an injunction hearing rather than a hearing for relief 63 Kofoo [2014] NSWSC 1079 [114]. 64 Sneakerboy [2020] NSWSC 996 [70]. 65 Shiloh Spinners Ltd v Harding [1973] AC 691, 725-726. -- 28 of 31 -- [2025] SADC 131 25 against forfeiture. The fact that the applicant would be deprived of members, that the Premises was its flagship store in South Australia and the loss of cross trading of apparel and supplies falls into this category. These matters are not relevant to the enquiry was to whether it is unconscionable for respondent to assist on its legal right to terminate the Lease and re-enter the Premises. What is relevant is that the applicant’s rights under the Lease are valuable rights and that it would lose the right to carry on its business from the Premises. Of potential relevance is the fact that under the terms of the Lease, Mr Solomos agreed to provide a guarantee of the applicant’s liabilities under the Lease. The applicant did not place on reliance on that fact in its submissions that relief ought to be granted. There was no evidence of Mr Solomos’ personal financial position, what other guarantees he had given and whether, in the event of the winding up of the applicant, he could meet all of these guarantees. These matters affect the weight to be given to the guarantee although it is of some weight in favour of granting relief. Opportunistic deployment of the right of termination and re-entry 88 The applicant further contended that relief should be granted because the respondent had formed the intention prior to 19 August 2025 that it wished to terminate the Lease and re-possess the Premises and lease them to a new tenant and then acted opportunistically to evict the applicant because of the existence of the winding up petition. In making this contention, the applicant relied upon the decision of Stanely J in Okami.66 In Okami, Stanley J held:67 It is apparent that Revelop had an intention to undertake a redevelopment on the site from no later than September 2022. So much is evident from PlanSA documents. It took active steps during 2023 and 2024 to advance those plans which were obviously inconsistent with the applicant’s rights under the Lease. Those plans were underway for two years before the respondent took steps to terminate the Lease for non-payment of rent. 89 I do not consider that the principle outlined in Okami is applicable to the claim for relief against forfeiture. The passage quoted above does not represent some new ground for relief but is the basis for the finding in that case that it was unconscionable for the landlord to exercise its right of termination and re-entry.68 It was unconscionable because the re-entry by the landlord was not to secure its rights under the Lease but to secure an extraneous benefit, namely the ability to re- develop the property in question. In the present case, the termination and re-entry was based on the applicant’s poor compliance with the terms of the Lease, (including the invariable failure to pay rent on the due date) and the existence of the winding up petition and not on an extraneous matter such as right to re-develop the Premises. The respondent exercised its right of forfeiture to secure its rights under the Lease. The third party’s rights to lease the Premises were subject to vacant possession and therefore not an attempt to secure an extraneous right. 66 [2024] SASC 151. 67 Ibid at [57]. 68 Ibid at [59]. -- 29 of 31 -- [2025] SADC 131 26 Conclusion 90 Taking into account the above matters, I have come to the conclusion that it is not unconscionable in all of the circumstances for the respondent to rely upon the right to terminate the Lease and re-enter the Premises. I have come to this conclusion for the following reasons: (1) the right of termination and to re-enter (because of the existence of the winding up petition) is security for the non-payment of rent and the disgorgement of rent that is paid in the event of a winding up and found to be an undue preference. Both of these objects are relevant to the respondent and afford protection to the respondent in the state of affairs as they now exist; (2) it is unclear whether, or if so when, the applicant will obtain finance and the winding up proceedings subsequently be dismissed and the Deputy Commissioner and supporting creditors paid. The default (or the event) is still in existence. That being so, it is not clear that the default will be remedied or the event no longer exist. In the cases where relief has been granted, despite the default not being remedied at the time of the hearing, the court found that the terms of the lease will be observed in the future. Therefore the court did not treat the unremedied breach as fatal to the application. The court could impose conditions which ensured that the breach was remedied by the end of the term of lease. The Court cannot be confident in the present case that the winding up petition will be dismissed and therefore the breach remedied; (3) there is a strong risk that in the absence of finance being provided, the applicant will be unable to pay rent as and when it falls due; (4) the Lease was a commercial contract entered by two parties. The terms of the Lease represented their allocation of risk. The Court should be wary of ignoring the concluded agreement between the parties and impose a lesser form of protection for the respondent as the landlord. The term of the Lease gave the respondent the right not to continue in a relationship with the lessee which had a winding up petition issued against it; (5) the applicant has demonstrated in the past a repeated failure to pay rent in a timely manner over a significant number of years and only pay following the issuing of a notice to remedy breach. The inference from this conduct must be that those breaches were deliberate. That permits the further inference to be made that if relief is given, rent will not be paid in accordance with the terms of the Lease in the future; and (6) the respondent has a replacement tenant and will therefore not suffer loss that it may otherwise suffer if there is a period where the Premises are vacant (which might occur if the applicant is in fact wound up). -- 30 of 31 -- [2025] SADC 131 27 91 These matters collectively lead me to the conclusion that it is not unconscionable for the respondent to rely on its contractual right to terminate the Lease and re-enter the Premises. The matters that have been raised by the applicant are not sufficient to lead to the conclusion that the forfeiture of the Lease was not a means of securing the bargain that had been agreed upon but was imposing on the applicant a penalty or was providing a benefit to the respondent that was over and above or disproportionate to the primary purpose of the bargain. The benefit will be excessive if the respondent is put back in the same position before the forfeiture, with the breach remedied (or the event no longer in existence), and its costs and expenses paid. That is not the case in these proceedings because the event (the winding up) is still in existence. 92 For the reasons that have been expressed, the applicant’s claim for relief against forfeiture is dismissed. -- 31 of 31 --