OKAMI SA NEWTON PTY LTD v NEWTON SC PTY LTD [2024] SASC 151

Applicant: OKAMI SA NEWTON PTY LTD Counsel: MR T DUGGAN KC WITH MR L WICKS - Solicitor: DENTONS AUSTRALIA LIMITED Respondent: NEWTON SC PTY LTD Counsel: DR C WARD SC WITH MR M BERGANDER-FLOREK - Solicitor: MADISON MARCUS LAW FIRM PTY LTD (NSW) Hearing Date/s: 07/11/2024 to 08/11/2024 File No/s: CIV-24-009221 B SUPREME COURT OF SOUTH AUSTRALIA (Civil: Application) 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. OKAMI SA NEWTON PTY LTD v NEWTON SC PTY LTD [2024] SASC 151 Judgment of the Honourable Justice Stanley 19 December 2024 LANDLORD AND TENANT - TERMINATION OF THE TENANCY - FORFEITURE - RELIEF AGAINST FORFEITURE LANDLORD AND TENANT - TERMINATION OF THE TENANCY - FORFEITURE - RELIEF AGAINST FORFEITURE - EQUITABLE RELIEF LANDLORD AND TENANT - TERMINATION OF THE TENANCY - FORFEITURE - RELIEF AGAINST FORFEITURE - RELIEF UNDER STATUTE This is an application for relief against forfeiture. On 24 February 2021 the applicant entered into a lease with G. & R. Difede Pty Ltd of a shop in the Newton Plaza Shopping Centre described as Shop 5, 297 Montague Road (the Lease). The Lease commenced on 1 March 2021 for a term of ten years. The applicant operates an all you can eat Japanese restaurant from the leased premises. On or about 20 December 2021, the respondent purchased the Newton Plaza Shopping Centre. The Lease was assigned to the respondent. The respondent is part of Revelop, a property development group which also owns the neighbouring Newton Village Shopping Centre. Revelop has plans to redevelop both properties to create a single, much larger shopping centre. The Lease provides that after a period of seven years the respondent could, inter alia terminate the Lease if it was proposing to substantially redevelop the premises. On 19 September 2024, the respondent purported to terminate the lease for non-payment of rent. Lease payments have subsequently been brought up to date. The applicant submits that it is entitled to relief against forfeiture. It submits inter alia that it is not hopelessly insolvent and that this matter does not fall within the limited category of cases in which the Court would decline to grant relief against forfeiture. The respondent submits that relief should be refused as any relief would be futile on account of the applicant being hopelessly insolvent. The respondent also submits that a significant consideration for the Court is prejudice to third party rights. -- 1 of 17 -- After terminating the Lease, the respondent became aware that the applicant entered into a deed of company arrangement by the appointment of administrators on 19 January 2024 and subsequently entered into a restructuring plan on 12 March 2024. The respondent submits that it is also entitled to terminate the Lease on these grounds. It insists it will exercise its right to terminate the Lease on this basis if relief against forfeiture is granted. The applicant submits that to the extent the respondent has any right to terminate on this basis, that right is stayed by reason of the operation of s 454N of the Corporations Act 2001 (Cth). The issues to be determined are whether, in the circumstances, relief against forfeiture ought to be granted, and whether, any right of the respondent to terminate the lease on the grounds that the applicant entered into administration and restructuring is stayed pursuant to s 454N of the Corporations Act 2001 (Cth). Held, granting relief against forfeiture: 1. In determining whether an application for relief against forfeiture ought to be granted, the fact of insolvency is not decisive and is merely a discretionary consideration. In any event, the respondent has not established that the applicant is hopelessly insolvent or that a grant of relief against forfeiture would be futile. 2. The respondent has engaged in conduct which gives rise to a compelling inference that it has acted opportunistically to evict the applicant in circumstances where it had determined to redevelop the property on a basis that was completely inconsistent with the applicant’s rights as a lessee. This is relevant to the determination of an application for relief against forfeiture. 3. The indefinite stay provided by s 454N(4)(b) of the Corporations Act 2001 (Cth) does not arise “by reason of restructuring” but by reason of the company having come or been under restructuring before the end of the stay period. A company enjoys the protection of the stay not only because it is under restructuring but also because it was under restructuring. A company will also be protected by the stay provided by s454N(4)(b) after the conclusion of the restructuring. Landlord and Tenant Act 1936 (SA) Part 1 and s 9; Corporations Act 2001 (Cth) s 453A, s 454N(1), (4) and (5), s 455B. ; Corporations Regulations 2001 (Cth) 5.3B.02(1)(j) and 5.3B.29(5), referred to. Riviera Holdings Pty Ltd v Fingal Glen Pty Ltd (2013) 120 SASR 450; Shiloh Spinners v Harding [1973] AC 691; Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of New South Wales Ltd (1970) 2 BPR 9562; Kelly & Anor v The Alternative Web Pty Ltd [2010] SASC 4; Kofoo Sussex Pty Ltd v Commerce Building Pty Ltd [2014] NSWSC 1079; Tannous v Cipolla Bros Holdings Pty Ltd [2001] NSWSC 236; Lewis v Doran Constructions Pty Ltd (In Liq) & Anor v Doran & Ors [2005] NSWCA 243; Wynsix Hotels (Oxford St) Pty Ltd v Toomey & Ors [2004] NSWSC 236; Hayes v Gunbola (1986) 4 BPR 9247 at 9250-9251; Greenwood Village Pty Ltd v Tom the Cheap (WA) Pty Ltd [1976] WAR 49 at [53]; MIR Holdings Pty Ltd & Anor v Marina Square Retail Pty Ltd [2020] NSWSC 1418, applied. Jones v Dunkel (1959) 101 CLR 298, discussed. -- 2 of 17 -- OKAMI SA NEWTON PTY LTD v NEWTON SC PTY LTD [2024] SASC 151 Civil STANLEY J Introduction 1 The applicant, Okami SA Newton Pty Ltd, is a member of a group of companies, some directly managed, others franchised, which operate Japanese restaurants around Australia, trading under the name Okami. On 24 February 2021 the applicant entered into a lease with G. & R. Difede Pty Ltd of a shop in the Newton Plaza Shopping Centre described as Shop 5, 297 Montague Road (the Lease). The Lease commenced on 1 March 2021. The Lease is for a term of ten years. The applicant operates an all you can eat Japanese restaurant from the leased premises. On or about 20 December 2021, the respondent, Newton SC Pty Ltd, purchased the Newton Plaza Shopping Centre. The Lease was assigned to the respondent. 2 The respondent, Newton SC Pty Ltd is part of Revelop, a property development group which is ultimately owned by Anthony El-Hazouri and his cousin, Charbel Hazzouri. Revelop also owns the neighbouring Newton Village shopping centre, which it purchased prior to acquiring the Newton Plaza shopping centre. 3 On 19 September 2024, the respondent purported to terminate the Lease for non-payment of rent. 4 Lease payments have subsequently been brought up to date. The applicant seeks orders for relief against forfeiture. The applicant resumed possession of the premises pursuant to orders made by Dart AsJ on 27 September 2024. The interim order has been extended to operate until the Court has delivered judgment on the application for relief from forfeiture. Evidence 5 The applicant called evidence from its franchise relationship manager Fred Jiang, and Thomas Summakwan, the financial controller of the Group. The respondent called Anthony El-Hazouri to give evidence. I will refer to their evidence where relevant in the course of these reasons. 6 The respondent made a Jones v Dunkel1 submission in relation to the applicant’s failure to call the controlling mind of the Okami Group, Mr Liang Wang. I do not accept the failure to call Mr Wang gives rise to an inference that his evidence would not have assisted the applicant’s case. The respondent submits that in the absence of evidence from Mr Wang, the controlling mind of Okami 1 [1959] HCA 8, (1959) 101 CLR 298. -- 3 of 17 -- [2024] SASC 151 Stanley J 2 Distributions Pty Ltd (Distributions), the Court cannot be satisfied that he is prepared to support the applicant. Mr Summakwan, the financial controller of the Group, gave that evidence and the steps taken by the Group to support the applicant evidences the Group’s commitment of support. I will come back to this matter later in these reasons. In the circumstances, I find it was not necessary for Mr Wang to give evidence. Accordingly, the failure to do so does not give rise to an adverse inference. Relevant circumstances 7 The applicant also has a claim against the respondent for breach of the Lease. This claim arises from alleged measures taken to erect fencing around the shopping centre and undertake redevelopment work. The applicant asserts the respondent’s actions derogate from its effective commercial operation of its restaurant, in breach of the covenant of quiet enjoyment, by blocking access to the adjoining carpark and effectively shutting down and closing off the leased property from the adjoining plaza. This claim is said to overlap with the claim for relief against forfeiture. That claim is not a matter I have to decide on this application. The trial which I heard on 7 and 8 November 2024 was limited to the claim for relief against forfeiture. 8 At the time the respondent purchased the Newton Plaza Shopping Centre it had four tenants including the applicant. The remaining businesses were an Australia Post Shop and Newsagent, Bargain City and Pulse 24-Hour Gym. Mr El- Hazouri said that over the course of the following years the respondent negotiated with all of the existing tenants for a relocation or early surrender of each lease to allow for redevelopment of the property.2 Mr El-Hazouri said that when the terms of the leases with Pulse and Bargain City expired, they were not renewed by the respondent. However, the respondent negotiated with the Australia Post shop to leave prior to their lease expiring.3 There can be no criticism of the respondent’s conduct in this regard. No doubt this was motivated by Revelop, the respondent’s ultimate holding company, which wants to redevelop the whole site. 9 In December 2023, negotiations occurred between the parties for surrender of the Lease. Those negotiations were unsuccessful. 10 Revelop has already redeveloped the Newton Village site. Revelop plans to redevelop the Newton Plaza property and join the properties to create a single, much larger, shopping centre. To that end, it entered into leases with new tenants from as early as May 2023; entered into a construction tender process in July 2024; committed to a construction program which was commenced on or about 8 August 2024; and scheduled demolition for 23 September 2024. A letter from Plan SA to the applicant indicates that the respondent, or its controlling Group, had committed 2 Affidavit of Anthony El-Hazouri 2 October 2024 (FDN 12) at [12]. 3 T.167.11-23. -- 4 of 17 -- [2024] SASC 151 Stanley J 3 to undertaking the redevelopment from no later than September 2022.4 That redevelopment cannot proceed without vacant possession of the leased premises. 11 The Lease in clause 5.26 provides that, after seven years from the commencement of the lease the respondent could inter alia relocate the applicant to other premises within the land. Clause 5.28 of the Lease provides that, after seven years from the commencement of the Lease, the respondent could, inter alia, terminate the Lease if it was proposing to substantially redevelop or demolish the premises in which case it was required to give nine months written notice of the demolition and permit the applicant to terminate within seven days of a demolition notice. Special condition 3 provides that in the event the applicant exercised its rights under clauses 5.26 or 5.28 the respondent would compensate it for 50 per cent of its initial fit out expenditure. 12 I am satisfied that the surrounds of the applicant’s restaurant premises in the Newton Plaza shopping centre are now materially different from the condition that existed before the respondent, or its controlling Group, decided to redevelop the shopping centre. 13 Access to the rear carpark is obstructed and fencing creates the impression to anyone observing the opening to the restaurant that it has the appearance of a construction site. I do not accept Mr El-Hazouri’s evidence that the reason for erecting the fencing to prevent entry into the rear carpark was because of security concerns arising from complaints by neighbours of noisy and disruptive activities in the carpark at night. There is evidence that these complaints substantially, if not exclusively, related to the carpark adjacent to the Newton Village shopping centre, not the Newton Plaza shopping centre adjacent to the demised premises.5 The respondent’s grounds why the Court should refuse relief 14 The respondent resists the application for relief against forfeiture. It does so on three broad grounds. First, on the ground that this is an exceptional case where the Court should exercise its discretion to refuse relief because the applicant is hopelessly insolvent and therefore relief would be futile as it would be unable to meet its debts as and when they fell due in the future. Second, on the ground that in breach of the Lease, of which the respondent was unaware when it gave notice of termination, the applicant had entered into an arrangement or composition of its creditors by the appointment of administrators on 19 January 2024.6 Third, on the ground that a grant of relief would prejudice third party rights that have been created since notice of termination was given. 15 The overarching submission of the respondent is that relief should be refused as it would be futile. 4 Exhibit FJ-5 to the Affidavit of Frank Jiang affirmed 26 September 2024 (FDN 2). 5 Exhibits AE-6 and AE-7 to the Affidavit of Anthony El Hazouri sworn 6 November 2024 (FDN 48). 6 Exhibit AE-1 to the Affidavit of Anthony El Hazouri 2 October 2024 (FDN 12), p 73. -- 5 of 17 -- [2024] SASC 151 Stanley J 4 Relevant principles 16 The relevant principles in statute and equity applicable to an application for relief against forfeiture were considered by Nicholson J in Riviera Holdings v Fingal Glen.7 Part 1 of the Landlord and Tenant Act 1936 (SA) confers statutory jurisdiction on the Court, in the circumstances therein described, to grant relief against forfeiture of a leasehold interest when the forfeiture has been effected as a result of non-payment of rent or non-compliance by the lessee with other lease covenants. Section 9 provides that the Court may grant relief against forfeiture for non-payment of rent on equitable grounds in a summary manner. The jurisdiction conferred does not operate at the expense of or to the exclusion of the inherent jurisdiction of this Court sitting as a Court of equity to relieve against penalties and forfeitures. The statutory jurisdiction is, in general terms, coextensive with the inherent jurisdiction. The equitable remedy for relief against forfeiture of a leasehold interest is explained by Lord Wilberforce in Shiloh Spinners v Harding,8 in a statement which has been frequently referred to with approval by Australian courts to the effect that there cannot be any doubt that courts of equity have reserved the right to relieve against forfeiture of property. In Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of New South Wales Ltd,9 in a statement of principle frequently cited notwithstanding that this case was decided before Shiloh Spinners, Hope J said:10 It is well established that the practice of the Court in exercising its jurisdiction to grant relief against forfeiture for non-payment of rent is that it generally regards the power to re-enter or forfeit for non-payment of rent as a security for the rent, and provided the lessor or other persons concerned can be put in the same position as before the forfeiture or re-entry, the lessee is entitled to be relieved against forfeiture upon payment of rent, costs and, in appropriate cases, of interest and of other expenses to which the lessor may have been put. … Despite these general statements, it is clear that the lessee is not entitled to relief as of right, and that the Court has a discretion in the matter, even though it may only be in very special circumstances in which relief will be refused. 17 While the Court is vested with jurisdiction to grant relief against forfeiture, it is recognised that, given a right of re-entry is merely security for payment of the rent, equity will usually grant relief if the tenant has brought the rent up to date, has paid any expenses to which the landlord has been put, and it is just and 7 Riviera Holdings Pty Ltd v Fingal Glen Pty Ltd [2013] SASC 77 at [9]-[17], (2013) 120 SASR 450 at 468-471. 8 [1973] AC 691 at [723]. 9 (1970) 2 BPR 9562. 10 Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of New South Wales Ltd (1970) 2 BPR 9562 at 9571-9752. -- 6 of 17 -- [2024] SASC 151 Stanley J 5 equitable to grant relief.11 As was explained by Kourakis J (as he then was) in Kelly & Anor v The Alternative Web Pty Ltd:12 Relief against forfeiture in the case of non-payment of rent is usually granted unless there is reason to believe that the tenant will not meet his or her future obligations. A history of non-payment remains a relevant consideration, but relief against forfeiture for non-payment has been granted even in cases where there is a history of irregular payments of rent. [citations omitted] 18 However, the granting of relief against forfeiture is discretionary. Relief may be refused if the tenant is unable to pay future rent or may reasonably be expected to become so, such that a grant of relief would be futile.13 19 It has been held that the test is whether, in the exercise of the court’s discretion, where default has been made good, resort by the landlord to its strict legal right of re-entry would be unconscionable.14 Is the applicant hopelessly insolvent? 20 On 19 September 2024, the respondent purported to terminate the Lease for non-payment of rent. The respondent contends that relief should be refused in circumstances where the applicant is hopelessly insolvent. The applicant denies that it is hopelessly insolvent. 21 I accept the applicant’s submission that the test for being hopelessly insolvent in the context of the determination of an application for relief against forfeiture is that the evidence of a tenant’s insolvency must be so glaringly obvious that there can be no real issue that the tenant is unable to pay its debts as and when they fall due. That must be apparent on the face of the documentary evidence. 22 The applicant submits that the evidence establishes that while rent has sometimes been paid late, it has paid the rent and has put in place arrangements that in future will ensure rent is paid on time. Further, it has provided a bank guarantee for payment of rent for three months and has undertaken to put a further three-month bank guarantee in place which provides adequate security for the protection of the respondent. 23 In Lewis v Doran Constructions Pty Ltd (In Liq) & Anor v Doran & Ors15 the New South Wales Court of Appeal held that if a company can borrow without security, it will have funds to pay its debts as they fall due and will be solvent, provided that the borrowing is on deferred payment terms or otherwise such that 11 Riviera Holdings v Fingal Glen [2013] SASC 77 at [15], (2013) SASR 450 at 471. 12 [2010] SASC 4 at [76]. 13 Kofoo Sussex Pty Ltd v Commerce Building Pty Ltd [2014] NSWSC 1079 at [111]. 14 Tannous v Cipolla Bros Holdings Pty Ltd [2001] NSWSC 236 at [26]-[28]. 15 [2005] NSWCA 243 at [109]. -- 7 of 17 -- [2024] SASC 151 Stanley J 6 the lender itself is not a creditor whose debt cannot be repaid as and when it becomes due and payable. The question of solvency is one of fact. 24 In Kofoo Sussex Pty Ltd v Commerce Building Pty Ltd16 Robb J held that it will only be in very rare or special circumstances that relief will be refused. However, where the tenant is hopelessly insolvent relief generally will be refused because any relief would ultimately be futile. The Court is entitled to take into consideration the likelihood rent will be paid in the future, or that its payment may be a preference for creditors. As such a tenant may be found to be hopelessly insolvent even if they are in a position to pay the arrears of rent at the time of the proceedings. But where the tenant’s financial position is not “hopeless”, and the tenant has entered into a scheme of arrangement with creditors, relief may be granted on payment of arrears to date. Likewise, relief may be granted where the tenant’s financial difficulties are the result of the initial costs of establishing its business on the premises, or poor management practices that have since been improved, or where it is feasible that the tenant’s financial difficulties can be remedied by sale of the business which the tenant conducts on the premises. Relief is unlikely to be refused where the lease provides for a guarantee or bond to cover the tenant’s obligation to pay rent.17 25 In Wynsix Hotels (Oxford St) Pty Ltd v Toomey & Ors18 Young CJ in Eq granted relief against forfeiture notwithstanding evidence about the poor financial state of the tenant. The Court granted relief for two reasons. First, because there was a bank guarantee in place for rent for six months which provided a sufficient guarantee of the payment of rent. If there was a default in payment of rent in the future for a month or so then fresh ejectment or re-entry could be effected, and no financial loss would be suffered. Second, because courts dealing with applications for relief against forfeiture will generally permit the tenant to have relief notwithstanding a poor rent history, at least on the first application. In Wynsix Hotels Young CJ said that the general rule that a court should not lend its aid to an insolvent company continuing to trade was not applicable because of the bank guarantee.19 26 A lessee may properly be given the benefit of any doubt concerning its financial capacity to comply with its obligations because any subsequent breach of the lease can be met with a further termination for which relief from forfeiture will be unlikely to be granted.20 However, the existence of serious grounds for concern as to whether the lessee is able to pay rent in the future is not a sufficient reason to 16 [2014] NSWSC 1079 at [113] – [114], citing with apparent approval, statements by Peter Butt in Land Law, 6th ed, 2010, Thomson Reuters. See also at [136]. 17 Kofoo Sussex Pty Ltd v Commerce Building Pty Ltd [2014] NSWSC 1079 at [114] citing with apparent approval, statements by Peter Butt in Land Law, 6th ed, 2010, Thomson Reuters. See also at [136]. 18 [2004] NSWSC 236. 19 Wynsix Hotels (Oxford St) Pty Ltd v Toomey & Ors [2004] NSWSC 236 at [31] – [33]. 20 Kofoo Sussex Pty Ltd v Commerce Building Pty Ltd [2014] NSWSC 1079 at [136] quoting Twinside Pty Ltd v Phoenician Nominees Pty Ltd [2008] WASC 110 at [36] – [37]. -- 8 of 17 -- [2024] SASC 151 Stanley J 7 refuse relief. Even if a lessee is insolvent a court may, nonetheless, exercise its discretion to grant relief against forfeiture.21 27 The respondent contends that the applicant has repeatedly failed to pay rent on time and, importantly, has no ability to continue to pay rent on time other than via an uncommercial and undocumented informal practice within the Okami Group, through the controlling corporate entity Okami Distributions Pty Ltd, of which Mr Liang Wang is a director. Counsel for the respondent characterised that practice as a ‘round robin’ arrangement involving taking funds from the accounts of other restaurants directly controlled by the Okami Group, which happen to be in funds on a particular day, when a debt falls due. The respondent submits that in these circumstances this is the unusual case where the Court should refuse relief from forfeiture because the applicant is hopelessly insolvent.22 28 On 19 September 2024 the respondent served the notice of termination of lease. On the same day the rent was brought up to date and the applicant re-entered the premises. The applicant subsequently resumed possession of the premises on 30 September 2024 in accordance with an order of this Court of 27 September 2024. 29 The respondent submits that the applicant was guilty of regular breaches of the Lease in failing to pay rent when it was due. The respondent’s submission is not supported by the evidence.23 I am satisfied, that with a few exceptions, the applicant paid its rent on time or early between January 2022 and December 2023. While payments were late in 2024, they were always made within the month that the rent was due, except for August 2024, which was not made until September. September’s rent was paid a few weeks late. It was submitted, and I accept, that those late payments were the result of an unfortunate sequence of events consequent upon the departure of a member of the Okami Group’s account staff and the subsequent failure to pay the rent on time. 30 The Notice to Remedy Breach was sent by the respondent on 4 September 2024. At that time the rent for the months of August and September had fallen due. The email attaching the notice of default was sent to an address usually monitored by the accounts and payment manager who had by that time left the Okami Group. Mr Jiang gave evidence that no one else within the Group was aware of the existence of the notice of default as at that date. While the manager had attempted to make the August rent payment on 26 August 2024 the payment was not processed for technical reasons. I am prepared to accept this explanation, nonetheless, the fact remains that the rent payments for August and September were late at the time of termination. I am satisfied that part of the explanation for the applicant’s failures to make rent payments when they were due, as the applicant 21 Hayes v Gunbola (1986) 4 BPR 9247 at 9250-9251; Wynsix Hotels (Oxford St) Pty Ltd v Toomey [2004] NSWSC 236 at [32]; Kofoo Sussex Pty Ltd v Commerce Building Pty Ltd [2014] NSWSC 1079 at [136]. 22 Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of New South Wales Ltd (1970) 2 BPR 9562 at 9571-9752. 23 Exhibit AE-1 to the Affidavit of Anthony El-Hazouri sworn 2 October 2024 (FDN 12), pp 27-32. -- 9 of 17 -- [2024] SASC 151 Stanley J 8 has acknowledged,24 is that they were delayed on occasions to manage cash flow. Payment of the August and September rent was made on 19 September 2024. I am satisfied on the evidence that once the problem was recognised payment was made swiftly and steps were taken to ensure that in future rent was paid on time. 31 I am satisfied on the evidence that the business of the Okami Group, in particular the restaurants directly managed by the Group, have to varying degrees been suffering significant cash flow difficulties for some time. That has resulted in the Group arranging its affairs so that undocumented inter-company loans have been a feature of the Group’s business model in order to ensure that individual company’s obligations to make payment to creditors have been met. It is unnecessary to analyse how this operated in detail. I am satisfied that on occasions the applicant was unable to meet its obligations as and when they fell due as a result of loans being made to other companies within the Group. From time to time, loans have been made to the applicant so it could meet its obligations to its creditors. Nonetheless, as has been pointed out by Young J in Hayes v Gumbola Pty Ltd25 where the breach of a lease occurs as a result of non-payment of rent the fact that the non-payment has been wilful is a factor to be considered in determining whether, in the exercise of the court’s discretion, relief against forfeiture will be ordered. But this is not a conclusive factor. Relief may be given whether or not there was past wilful conduct or whether or not the tenant may be still in financial difficulties. 32 It is to be remembered that as at the date of termination the applicant still had more than six years of the Lease term to run. 33 There is no reason to doubt the preparedness of Distribution to support the applicant. It has already done so. It has also undertaken to provide a further bank guarantee for three months in addition to the bank guarantee for three months provided by the applicant. This was the consideration that proved crucial in Wynsix. The evidence satisfies me that it is able to continue to support the applicant if necessary into the future as it has a healthy balance sheet. Distribution’s revenue for the financial year 2022 / 2023 was $24,934,498 and profit for the financial year was $3,114,811. Its retained earnings are $8,307,918. Its profit for the financial year ended 30 June 2024 will be $5,907,897.26 34 In addition, the applicant submits it has made changes to its business model to increase efficiency, save costs and increase profitability. The applicant is moving to increase takeaway business through Menulog and Uber Eats. It has also acquired a Botinkit Max sushi robot at a cost in the vicinity of $40,000. These steps have allowed it to reduce the number of employees. These are constructive steps to improve management practices and reduce overheads. I accept the submission of the applicant that these circumstances highlight why relief should 24 Affidavit of Thomas Summakwan sworn 4 November 2024 (FDN 45) at [10]-[26]. 25 Hayes v Gumbola Pty Ltd [1986] 4 BPR 9247 at 9250. 26 Exhibits TK-3 and TK-4 to the Affidavit of Thomas Summakwan sworn 4 November 2024 (FDN 45). -- 10 of 17 -- [2024] SASC 151 Stanley J 9 be granted for the first time. It is one of the factors that was found crucial in the grant of relief in Kofoo Sussex. The applicant should be given the benefit of the doubt as was also the case in Kofoo Sussex. 35 In these circumstances I do not consider the applicant is hopelessly insolvent. Even if I am wrong about that, the fact of insolvency is not decisive, as pointed out in Hayes v Gumbola and Wynsix. It is merely a discretionary consideration. In this case, weighing the fact of insolvency, if that is the case, does not persuade me to refuse relief. If the applicant is hopelessly insolvent such that it cannot meet its liabilities when they fall due in the future, there is a significant risk that any further application for relief will be refused. 36 Contrary to the evidence of Mr El-Hazouri, I do not accept that the concern for the respondent is security for payment of the rent. Rather, its focus is in securing vacant possession of the demised premises for the purpose of undertaking a redevelopment of the land. Breach of the Lease by the applicant in entering into an arrangement or composition with its creditors 37 The respondent submits that the applicant breached clause 5.1.2.3.3 of the Lease which provides, inter alia, that if the lessee company enters into an arrangement or composition with its creditors, the lessor shall have the right to terminate the Lease and re-enter and repossess the premises. 38 The respondent submits that the appointment of an administrator is an insolvency event in accordance with the terms of clause 5.1.2.3 of the Lease. It further contends it is entitled to rely on the breach of the Lease notwithstanding that it was not relied upon in the notice of termination as it only became aware of the appointment of the administrator after it re-entered the premises. While that question is not entirely settled, in Riviera v Fingal Glen Nicholson J considered it appropriate to rely on breaches of the Lease not stipulated in the termination notice in weighing the exercise of the discretion to grant relief.27 39 After terminating the Lease the respondent learned that the applicant entered into a restructuring plan on 12 March 2024 by which the applicant was permitted to discharge its existing debt in the sum of $284,753.05 by a payment in the sum of $54,500.00 of which $5,500.00 was to be paid to the administrators appointed on 19 January 2024 to undertake a small business restructuring. The respondent submits that as a result, the application for relief against forfeiture is entirely futile. The respondent submits the entry into the restructuring plan created a pre-existing right on the part of the respondent to terminate the Lease and repossess the premises. This was not known to the respondent at the time of termination. The 27 Riviera Holdings Pty Ltd v Fingal Glen Pty Ltd [2013] SASC 77 at [104], (2013) 120 SASR 450 at 493- 494. -- 11 of 17 -- [2024] SASC 151 Stanley J 10 respondent insists it will exercise its right to terminate the Lease on this basis if relief against forfeiture is granted. 40 The applicant submits that to the extent that the respondent has a right to terminate the Lease under clause 5.1.2.3.3, that right is stayed by reason of the operation of s 454N(1), (4) and (5) of the Corporations Act 2001 (Cth) (the Corporations Act). Those provisions are as follows: Stay on enforcing rights (1) A right cannot be enforced against a company for: (a) the reason that the company has come or is under restructuring; or (b) the company's financial position, if the company is under restructuring; or (c) a reason, prescribed by the regulations for the purposes of this paragraph, that relates to: (i) the company coming, or possibly coming, under restructuring; or (ii) the company's financial position; if the company later comes under restructuring; or (d) a reason that, in substance, is contrary to this subsection; if the right arises for that reason by express provision (however described) of a contract, agreement or arrangement. Enforcing rights after the stay for reasons relating to earlier circumstances (4) The right is unenforceable against the company indefinitely after the end of the stay period to the extent that a reason for seeking to enforce the right: (a) is the company's financial position before the end of the stay period; or (b) is the company having come or been under restructuring before the end of the stay period; or (c) is a reason, prescribed by the regulations for the purposes of this paragraph, relating to circumstances in existence during the stay period; or (d) is a reason referred to in paragraph (1)(c) or (d). Rights not subject to the stay (5) Subsection (1) does not apply to the right if it is: (a) a right under a contract, agreement or arrangement entered into after the company comes under restructuring; or (b) a right under a contract, agreement or arrangement entered into before 1 July 2018; or -- 12 of 17 -- [2024] SASC 151 Stanley J 11 (c) a right contained in a kind of contract, agreement or arrangement: (i) prescribed by the regulations for the purposes of this subparagraph; or (ii) declared under paragraph (6)(a); or (d) a right of a kind: (i) prescribed by the regulations for the purposes of this subparagraph; or (ii) declared under paragraph (6)(b); or (e) a right of a kind declared under paragraph (6)(c), and the circumstances specified in that declaration exist. 41 The respondent submits that s 455B(3), appears in the same subdivision of the Corporations Act as s 454N,28 and provides that regulations may make provision for and in relation to, amongst other things: (h) the nature and duration of any moratorium on the enforcement of debts of and claims against a company that makes a restructuring plan; (i) the effect of a restructuring plan on rights, obligations and liabilities in relation to debts of and claims against a company. 42 Regulation 5.3B.02(1)(j) provides that for the purposes of s 453A(b) of the Corporations Act, the restructuring of a company ends if the company makes a restructuring plan. 43 Restructuring is defined in s 453A as follows: Meaning of restructuring The restructuring of a company: (a) begins when a restructuring practitioner for the company is appointed under s 453B; and (b) ends in the circumstances prescribed by the regulations. 44 The respondent submits that applying s 453A of the Corporations Act and Regulation 5.3B.02(1)(j) of the Corporations Regulations 2001 (Cth) (regulations), results in the restructuring ending when the applicant entered into the restructuring plan on 12 March 2024. The respondent submits its right to terminate the Lease under clause 5.1.2.3.3 arose by reason of the applicant entering an arrangement or composition with its creditors. That occurred when the applicant entered the restructuring plan on 12 March 2024 and not during 28 Subdivision G of Part 5.3B. -- 13 of 17 -- [2024] SASC 151 Stanley J 12 restructuring which occurred between 19 January 2024 and 12 March 2024. The respondent submits that it follows that neither s 454N(1) or (4) apply to this case, and there is no moratorium stay imposed on the respondent’s right to terminate the Lease under clause 5.1.2.3.3 by reason of the applicant’s entry into the restructuring plan. 45 The respondent submits that the stay on enforcement of rights prescribed under s 454N(1), and thereafter under s 454N(4), apply to rights that arise by reason of restructuring. 46 I do not accept this submission. The indefinite stay provided by s 454N(4)(b) does not arise “by reason of restructuring” but by reason of the company having come or been under restructuring before the end of the stay period. A company enjoys the protection of the stay not only because it is under restructuring but also because it was under restructuring. The use of the term “been” is important. It speaks to a past event. In distinction to the qualifying test of whether the company has come under restructuring, the company will also be protected by the stay after the conclusion of the restructuring. 47 Crucial to the respondent’s arguments is the proposition that the respondent’s right to terminate the Lease pursuant to clause 5.1.2.3.3 arose by reason of the applicant entering into an arrangement or composition with its creditors which occurred when the applicant entered the restructuring plan on 12 March 2024. The respondent submits that the right to terminate did not occur during restructuring which occurred between 19 January 2024 and 12 March 2024. It contends that the stay under s 454N does not stay the exercise of a right that arises after the restructuring which occurs when a company makes a restructuring plan pursuant to s 453A(b) and regulation 5.3B.02(1)(j). Rather, it submits the right to terminate the Lease under clause 5.1.2.3.3 arose by reason of the applicant entering an arrangement or composition with its creditors, not by the applicant having come or been under restructuring. However, that event was coterminous with the restructuring ending by entry into the restructuring plan on 12 March 2024. While accepting the proposition that a stay under s 454N does not stay the exercise of a right that arises after the restructuring, I do not accept that the right sought to be exercised by the respondent arose after the restructuring. So much is apparent from the terms of s 454N(4)(b). 48 In addition, the respondent’s construction is based on a misconception that s 455B appears in the same subdivision as s 454N, that is subdivision G of Part 5.3B of the Corporations Act. While s 454N appears in subdivision G of Division 2 of Part 5.3B, s 455B appears in Division 3 of Part 5.3B. 49 I accept the submission of the applicant that the purpose of the stay conferred by s 454N is to constrain, inter alia, a landlord from exercising rights following a small business restructuring which would frustrate the work to be performed by the restructuring regime which is intended to provide a basis by which a company can trade out of its difficulties in reliance upon a restructure. -- 14 of 17 -- [2024] SASC 151 Stanley J 13 50 Consistent with that purposive construction, the respondent’s reliance upon regulation 5.3B.29(5) of the regulations is not applicable.29 It is not a regulation made “for the purposes of this sub-paragraph” in s 454N(5)(c)(i) or (d)(i). 51 In any event, there is a valid reason why the Court should not decide the application for relief on the basis of the respondent’s reliance on its rights pursuant to clause 5.1.2.3.3. As was pointed out in Riviera Holdings30 by Nicholson J, in considering a submission that the Court should refuse to grant relief because it would be futile, having regard to a clause in that lease in similar terms as clause 5.1.2.3.3, a court should only deal with issues properly before it at the time of the decision to be made. A tenant, having obtained relief against forfeiture, is always at risk that another right of re-entry will become available to the landlord in the future and will be exercised. Nicholson J said, citing the reasons of Jackson CJ in Greenwood Village Pty Ltd v Tom the Cheap (WA) Pty Ltd,31 that a court should be careful not to pre-empt a determination of the entry into a restructuring issue, and possibly others, in circumstances where the issues are not yet properly before the court. It would be tantamount to determining in advance any further application for relief that might be brought, without the full circumstances, relevant at the time of any such future re-entry and forfeiture, being before the Court.32 Prejudice to third parties 52 The respondent submits that a significant consideration in the exercise by the Court of its discretion is the prejudice to third party rights that were created in relation to the premises after re-entry by the respondent. 53 The respondent submits that at various times it entered into numerous contracts with third parties in respect of the premises and works relating to the land on which the premises is situated. These contracts are a lease with TJX Australia Pty Ltd (TK Maxx), a contract for building works with Structural Concepts Australia, and a contract with SA Power Networks for power works. 54 Prejudice to third party rights is a discretionary factor to be considered where applicable. In MIR Holdings Pty Ltd & Anor v Marina Square Retail Pty Ltd33 Stevenson J succinctly explained the general principle as follows:34 29 Regulation 5.3B.29(5) provides: the fact that a restructuring plan has been made does not affect a right that an owner or lessor of property has in relation to that property, unless (a) the owner or lessor accepted the proposal to make the plan and the plan affects that right; or (b) the Court so orders under subregulation 5.3B.64(4). 30 Riviera Holdings v Fingal Glen [2013] SASC 77 at [81], (2013) SASR 450 at 488. 31 [1976] WAR 49 at [53]. 32 Riviera Holdings v Fingal Glen [2013] SASC 77 at [81], (2013) SASR 450 at 488. 33 [2020] NSWSC 1418. 34 MIR Holdings Pty Ltd & Anor v Marina Square Retail Pty Ltd [2020] NSWSC 1418 at [19]. -- 15 of 17 -- [2024] SASC 151 Stanley J 14 The Court will generally not grant relief against forfeiture where a third party has acquired rights over the property. However, if the third party knew of the relevant circumstances, and had notice of the lessee's claim to seek relief, relief may be granted. 55 In this case, when considering the argument concerning prejudice to third party rights, it is relevant to note the matters set out earlier in the judgment concerning Revelop’s redevelopment plans for the leased premises. Months before the termination notice, and despite clauses 5.26 and 5.28 of the Lease, in July 2024 the respondent commenced a construction tender process; committed to a construction program which provided for the redevelopment of the shopping centres, including the demised premises, commencing on or about 8 August 2024; and scheduled demolition for 23 September 2024.35 56 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.36 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. 57 I accept the submission of the applicant that the sequence of events from 2022 onwards give rise to a compelling inference that the respondent has acted opportunistically to evict the applicant in circumstances where it had determined to redevelop Newton Plaza shopping centre on a basis that was completely inconsistent with the applicant’s rights as a lessee. This is evident from the agreement between Redevelop and TK Maxx of an agreement to lease entered into on 25 May 2023,37 more than a year before the notice of termination was delivered. 58 The respondent acted promptly to remedy the default in rent once it was aware of it. On the same day as the termination notice was sent, the rent was brought up to date, an explanation was provided for the non-payment and it was advised by the applicant that steps had been taken to ensure there was no further breach. Two days later the applicant gave the respondent notice that it would, if necessary, bring an application for relief from forfeiture. 59 In any event, I note that none of the third parties have appeared or have sought to pursue their rights. In all of the circumstances I consider it unconscionable that the respondent should insist on its legal rights under the Lease given its clear intention to force the applicant out of its rights as lessee. Conclusion 60 The respondent has not established that the applicant is hopelessly insolvent or that a grant of relief against forfeiture would be futile. Weighing the relevant 35 Exhibit AE-1 to the Affidavit of Anthony El-Hazouri sworn 2 October 2024 (FDN 12) at [62], [68], p 80. 36 Exhibit FJ-5 to the Affidavit of Frank Jiang affirmed 26 September 2024 (FDN 2) p 79. 37 Confidential Exhibit AE-2 to the Affidavit of Anthony El-Hazouri sworn 2 October 2024 (FDN 13). -- 16 of 17 -- [2024] SASC 151 Stanley J 15 discretionary considerations, I would grant relief against forfeiture. I would hear the parties as to the terms of the orders I should make and the question of costs. -- 17 of 17 --